Duality in dynamic discrete-choice models
Abstract
Using results from convex analysis, we investigate a novel approach to identification and estimation of discrete choice models which we call the Mass Transport Approach (MTA). We show that the conditional choice probabilities and the choice-specific payoffs in these models are related in the sense of conjugate duality, and that the identification problem is a mass transport problem. 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.
- Publication:
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arXiv e-prints
- Pub Date:
- February 2021
- DOI:
- 10.48550/arXiv.2102.06076
- arXiv:
- arXiv:2102.06076
- Bibcode:
- 2021arXiv210206076C
- Keywords:
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- Economics - Econometrics
- E-Print:
- 42 pages, 8 figures