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

  • Hanming Fang


    (Department of Economics, University of Pennsylvania)

  • Yang Wang


    (Department of Economics, Lafayette College)

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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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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