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Estimating Dynamic Discrete Choice Models With Hyperbolic Discounting, With An Application To Mammography Decisions

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  • Hanming Fang
  • Yang Wang

Abstract

We extend the semiparametric estimation method for dynamic discrete choice models using Hotz and Miller's (Review of Economic Studies 60 (1993), 497–529) conditional choice probability approach to the setting where individuals may have hyperbolic discounting time preferences and may be naive about their time inconsistency. We illustrate the proposed identification and 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 underutilization of this preventive health care. Our results show evidence for both present bias and naivety.

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  • Hanming Fang & Yang Wang, 2015. "Estimating Dynamic Discrete Choice Models With Hyperbolic Discounting, With An Application To Mammography Decisions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56, pages 565-596, May.
  • Handle: RePEc:wly:iecrev:v:56:y:2015:i::p:565-596
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    Cited by:

    1. Daniel Kemptner & Songül Tolan, 2016. "The Role of Time Preferences in Educational Decision Making," Discussion Papers of DIW Berlin 1628, DIW Berlin, German Institute for Economic Research.
    2. Ansgar Wübker, 2014. "Explaining variations in breast cancer screening across European countries," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(5), pages 497-514, June.
    3. Hinnosaar, Marit, 2016. "Time inconsistency and alcohol sales restrictions," European Economic Review, Elsevier, vol. 87(C), pages 108-131.
    4. Humphreys, Brad & Ruseski, Jane & Zhou, Li, 2015. "Physical Activity, Present Bias, and Habit Formation: Theory and Evidence from Longitudinal Data," Working Papers 2015-6, University of Alberta, Department of Economics.
    5. Février, Philippe & Wilner, Lionel, 2016. "Do consumers correctly expect price reductions? Testing dynamic behavior," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 25-40.
    6. Schumacher, Heiner, 2016. "Insurance, self-control, and contract flexibility," European Economic Review, Elsevier, vol. 83(C), pages 220-232.
    7. Han Bleichrodt & Yu Gao & Kirsten I. M. Rohde, 2016. "A measurement of decreasing impatience for health and money," Journal of Risk and Uncertainty, Springer, vol. 52(3), pages 213-231, June.
    8. Gautier, Pieter A. & 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).
    9. Patrick Bajari & Chenghuan Sean Chu & Denis Nekipelov & Minjung Park, 2016. "Identification and semiparametric estimation of a finite horizon dynamic discrete choice model with a terminating action," Quantitative Marketing and Economics (QME), Springer, vol. 14(4), pages 271-323, December.
    10. 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.
    11. Cabo, Francisco & Martín-Herrán, Guiomar & Martínez-García, María Pilar, 2016. "Unbounded growth in the Neoclassical growth model with non-constant discounting," Mathematical Social Sciences, Elsevier, vol. 84(C), pages 93-104.
    12. Haan, Peter & Haywood, Luke & Schneider, Ulrich, 2016. "Labor Supply of Mothers: The Role of Time Discounting," Annual Conference 2016 (Augsburg): Demographic Change 145751, Verein für Socialpolitik / German Economic Association.
    13. Evgeny Yakovlev, 2016. "Demand for Alcohol Consumption and Implication for Mortality: Evidence from Russia," Working Papers w0221, Center for Economic and Financial Research (CEFIR).
    14. Bertoni, M.; Corazzini, L.; Robone, S.;, 2017. "The Good Outcomes of Bad News. A Randomized Field Experiment on Formatting Breast Cancer Screening Invitations," Health, Econometrics and Data Group (HEDG) Working Papers 17/27, HEDG, c/o Department of Economics, University of York.
    15. Bart Cockx & Corinna Ghirelli & Bruno Van der Linden, 2013. "Monitoring Job Search Effort with Hyperbolic Time Preferences and Non-Compliance: A Welfare Analysis," CESifo Working Paper Series 4187, CESifo Group Munich.
    16. Robin S. Lee, 2013. "Vertical Integration and Exclusivity in Platform and Two-Sided Markets," American Economic Review, American Economic Association, vol. 103(7), pages 2960-3000, December.
    17. repec:oup:restud:v:84:y:2017:i:4:p:1379-1423. is not listed on IDEAS
    18. Abbring, Jaap H & Daljord, Øystein, 2016. "Identifying the Discount Factor in Dynamic Discrete Choice Models," CEPR Discussion Papers 11133, C.E.P.R. Discussion Papers.
    19. Aniko Biro;, 2012. "An analysis of mammography decisions with a focus on educational differences," Health, Econometrics and Data Group (HEDG) Working Papers 12/11, HEDG, c/o Department of Economics, University of York.
    20. David Freeman, 2016. "Revealing Naïveté and Sophistication from Procrastination and Preproperation," Discussion Papers dp16-11, Department of Economics, Simon Fraser University.
    21. Gustman, Alan L. & Steinmeier, Thomas L., 2012. "Policy effects in hyperbolic vs. exponential models of consumption and retirement," Journal of Public Economics, Elsevier, vol. 96(5), pages 465-473.
    22. 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, vol. 113(C), pages 80-95.
    23. Marc K. Chan, 2017. "Welfare Dependence and Self-Control: An Empirical Analysis," Review of Economic Studies, Oxford University Press, vol. 84(4), pages 1379-1423.
    24. Evgeny Yakovlev, 2012. "Peers and Alcohol: Evidence from Russia," Working Papers w0182, Center for Economic and Financial Research (CEFIR).
    25. D. Pennesi, 2016. "Intertemporal discrete choice," Working Papers wp1061, Dipartimento Scienze Economiche, Universita' di Bologna.

    More about this item

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • I1 - Health, Education, and Welfare - - Health

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