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Estimating Dynamic Discrete Choice Models with Hyperbolic Discounting, with an Application to Mammography Decisions

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  • Hanming Fang

    ()
    (Department of Economics, University of Pennsylvania)

  • Yang Wang

    ()
    (Department of Economics, Lafayette College)

Abstract

We extend the semi-parametric estimation method for dynamic discrete choice models using Hotz and Miller’s (1993) conditional choice probability (CCP) approach to the setting where individuals may have hyperbolic discounting time preferences and may be naive about their time inconsistency. We illustrate the proposed estimation method with an empirical application of adult women’s decisions to undertake mammography to evaluate the importance of present bias and naivety in the under-utilization of this preventive health care. Our results show evidence for both present bias and naivety.

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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 10-033.

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Length: 43 pages
Date of creation: 04 Oct 2010
Date of revision:
Handle: RePEc:pen:papers:10-033

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Keywords: Time Inconsistent Preferences; Intrapersonal Games; Dynamic Discrete Choices; Preventive Care;

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References

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  1. Ariel Pakes & Michael Ostrovsky & Steve Berry, 2004. "Simple Estimators for the Parameters of Discrete Dynamic Games (with Entry/Exit Samples)," NBER Working Papers 10506, National Bureau of Economic Research, Inc.
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  4. David Laibson & Andrea Repetto & Jeremy Tobacman, 2005. "Estimating Discount Functions with Consumption Choices over the Lifecycle," Levine's Bibliography 784828000000000643, UCLA Department of Economics.
  5. Victor Aguirregabiria & Pedro Mira, 2004. "Sequential Estimation Of Dynamic Discrete Games," Working Papers, CEMFI wp2004_0413, CEMFI.
  6. Krusell, Per & Kuruscu, Burhanettin & Smith Jr., Anthony A, 2001. "Equilibrium Welfare and Government Policy with Quasi-Geometric Discounting," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2693, C.E.P.R. Discussion Papers.
  7. Carrillo, Juan D & Mariotti, Thomas, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 67(3), pages 529-44, July.
  8. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, Econometric Society, vol. 55(5), pages 999-1033, September.
  9. Hanming Fang & Dan Silverman, 2009. "Time-Inconsistency And Welfare Program Participation: Evidence From The Nlsy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1043-1077, November.
  10. Alessandro Tarozzi & Aprajit Mahajan, 2011. "Time Inconsistency, Expectations and Technology Adoption: The Case of Insecticide Treated Nets," Working Papers, Duke University, Department of Economics 11-14, Duke University, Department of Economics.
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  12. Saul Pleeter & John T. Warner, 2001. "The Personal Discount Rate: Evidence from Military Downsizing Programs," American Economic Review, American Economic Association, American Economic Association, vol. 91(1), pages 33-53, March.
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  14. Fang, Hanming & Silverman, Dan, 2004. "On the compassion of time-limited welfare programs," Journal of Public Economics, Elsevier, Elsevier, vol. 88(7-8), pages 1445-1470, July.
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Cited by:
  1. B. Cockx & C. Ghirelli & B. Van Der Linden, 2013. "Monitoring Job Search Effort with Hyperbolic Time Preferences and Non-Compliance: A Welfare Analysis," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 13/833, Ghent University, Faculty of Economics and Business Administration.
  2. Gautier, Pieter & van Vuuren, Aico, 2011. "A Flexible Test for Present Bias and Time Preferences Using Land-Lease Contracts," IZA Discussion Papers 5821, Institute for the Study of Labor (IZA).
  3. Andrew T. Ching & Tülin Erdem & Michael P. Keane, 2013. "Learning Models: An Assessment of Progress, Challenges and New Developments," Economics Papers 2013-W07, Economics Group, Nuffield College, University of Oxford.
  4. Evgeny Yakovlev, 2012. "Peers and Alcohol: Evidence from Russia," Working Papers, Center for Economic and Financial Research (CEFIR) w0182, Center for Economic and Financial Research (CEFIR).
  5. Ansgar Wübker, 2012. "Explaining Variations in Breast Cancer Screening Across European Countries," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0370, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  6. Robin S. Lee, 2007. "Vertical Integration and Exclusivity in Two-Sided Markets," Working Papers, NET Institute 07-39, NET Institute, revised Aug 2012.
  7. Cockx, Bart & Ghirelli, Corinna & Van der Linden, Bruno, 2014. "Is it socially efficient to impose job search requirements on unemployed benefit claimants with hyperbolic preferences?," Journal of Public Economics, Elsevier, Elsevier, vol. 113(C), pages 80-95.
  8. Aniko Biro;, 2012. "An analysis of mammography decisions with a focus on educational differences," Health, Econometrics and Data Group (HEDG) Working Papers, HEDG, c/o Department of Economics, University of York 12/11, HEDG, c/o Department of Economics, University of York.
  9. Gustman, Alan L. & Steinmeier, Thomas L., 2012. "Policy effects in hyperbolic vs. exponential models of consumption and retirement," Journal of Public Economics, Elsevier, Elsevier, vol. 96(5), pages 465-473.

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