Inference in dynamic discrete choice problems under local misspecification

DOI10.3982/QE917zbMATH Open1416.62656arXiv1603.07987OpenAlexW2962885913WikidataQ128412392 ScholiaQ128412392MaRDI QIDQ4629403FDOQ4629403

Authors: Federico A. Bugni, Takuya Ura 

Publication date: 27 March 2019

Published in: Quantitative Economics (Search for Journal in Brave)

Abstract: Single-agent dynamic discrete choice models are typically estimated using heavily parametrized econometric frameworks, making them susceptible to model misspecification. This paper investigates how misspecification affects the results of inference in these models. Specifically, we consider a local misspecification framework in which specification errors are assumed to vanish at an arbitrary and unknown rate with the sample size. Relative to global misspecification, the local misspecification analysis has two important advantages. First, it yields tractable and general results. Second, it allows us to focus on parameters with structural interpretation, instead of "pseudo-true" parameters. We consider a general class of two-step estimators based on the K-stage sequential policy function iteration algorithm, where K denotes the number of iterations employed in the estimation. This class includes Hotz and Miller (1993)'s conditional choice probability estimator, Aguirregabiria and Mira (2002)'s pseudo-likelihood estimator, and Pesendorfer and Schmidt-Dengler (2008)'s asymptotic least squares estimator. We show that local misspecification can affect the asymptotic distribution and even the rate of convergence of these estimators. In principle, one might expect that the effect of the local misspecification could change with the number of iterations K. One of our main findings is that this is not the case, i.e., the effect of local misspecification is invariant to K. In practice, this means that researchers cannot eliminate or even alleviate problems of model misspecification by changing K.

Full work available at URL: https://arxiv.org/abs/1603.07987

Recommendations

• Inference for iterated GMM under misspecification
• Local Asymptotic Specification Error Analysis
• Inference in dynamic discrete choice models with serially orrelated unobserved state variables
• Generalized indirect inference for discrete choice models
• Dynamic discrete choice structural models: a survey

zbMATH Keywords

asymptotic distributionestimationmisspecificationinferencelocal misspecificationsingle-agent dynamic discrete choice models

Mathematics Subject Classification ID

Asymptotic properties of nonparametric inference (62G20) Markov processes: estimation; hidden Markov models (62M05) Applications of statistics to economics (62P20)

Cites Work

• Maximum Likelihood Estimation of Misspecified Models
• Title not available (Why is that?)
• Identification in Parametric Models
• Generalized method of moments specification testing
• Maximum Likelihood Specification Testing and Conditional Moment Tests
• Diagnostic testing and evaluation of maximum likelihood models
• Robustness, infinitesimal neighborhoods, and moment restrictions
• Title not available (Why is that?)
• Title not available (Why is that?)
• VAR forecasting under misspecification
• Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher
• Conditional Choice Probabilities and the Estimation of Dynamic Models
• Identifying Dynamic Discrete Decision Processes
• Discounted Dynamic Programming
• Pseudo-likelihood estimation and bootstrap inference for structural discrete Markov decision models
• Asymptotic Least Squares Estimators for Dynamic Games
• Maximum Likelihood Estimation of Discrete Control Processes
• Swapping the Nested Fixed Point Algorithm: A Class of Estimators for Discrete Markov Decision Models
• Dynamic discrete choice structural models: a survey
• Conditional choice probability estimation of dynamic discrete choice models with unobserved heterogeneity
• A Simulation Estimator for Dynamic Models of Discrete Choice
• Distortions of asymptotic confidence size in locally misspecified moment inequality models
• On the surjectivity of the mapping between utilities and choice probabilities

Cited In (2)

• Minimizing sensitivity to model misspecification
• Local Asymptotic Specification Error Analysis

This page was built for publication: Inference in dynamic discrete choice problems under local misspecification

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q4629403)