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Duality in Dynamic Discrete Choice Models

Author

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  • Khai Chiong

    (INET and Department of Economics)

  • Alfred Galichon

    (Département d'économie)

  • Matt Shum

    (Division of Humanities and Social Sciences)

Abstract

Using results from convex analysis, we characterize the identification and estimation of dynamic discrete-choice models based on the random utility framework. We show that the conditional choice probabilities and the choice specific payoffs in these models are related in the sense of conjugate duality. Based on this, we propose a new two-step estimator for these models; interestingly, the first step of our estimator involves solving a linear program which is identical to the classic assignment (two-sided matching) game of Shapley and Shubik (1971). The application of convex-analytic tools to dynamic discrete choice models, and the connection with two-sided matching models, is new in the literature.

Suggested Citation

  • Khai Chiong & Alfred Galichon & Matt Shum, 2015. "Duality in Dynamic Discrete Choice Models," Sciences Po publications info:hdl:2441/7svo6civd69, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/7svo6civd6959qvmn4965cth1d
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    References listed on IDEAS

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    Cited by:

    1. Mogens Fosgerau & André De Palma, 2016. "Generalized entropy models," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291347, HAL.
    2. Fosgerau, Mogens & Melo, Emerson & Shum, Matt, 2017. "Discrete Choice and Rational Inattention: a General Equivalence Result�," MPRA Paper 76605, University Library of Munich, Germany.
    3. Mogens Fosgerau & Emerson Melo & André De Palma & Matthew Shum, 2017. "Discrete Choice and Rational Inattention: A General Equivalence Result," Working Papers hal-01501313, HAL.
    4. Mogens Fosgerau & André De Palma, 2016. "Generalized entropy models," Working Papers hal-01291347, HAL.

    More about this item

    Keywords

    Discret choice model; Mass Transport Approach (MTA); Conjugate duality;

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