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

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.

[1]  C. L. Benkard,et al.  Estimating Dynamic Models of Imperfect Competition , 2004 .

[2]  Martin Pesendorfer,et al.  Identification and Estimation of Dynamic Games , 2003 .

[3]  Jessica Goldberg,et al.  Revising Commitments: Time Preference and Time-Inconsistency in the Field , 2011 .

[4]  Ted O’Donoghue,et al.  Doing It Now or Later , 1999 .

[5]  Jonathan Zinman,et al.  Put Your Money Where Your Butt is: A Commitment Contract for Smoking Cessation , 2009 .

[6]  Robert C. Miller,et al.  CCP Estimation of Dynamic Discrete Choice Models with Unobserved Heterogeneity , 2008 .

[7]  M. Shum,et al.  Nonparametric identification of dynamic models with unobserved state variables , 2008 .

[8]  Gabriel Picone,et al.  Effects of Risk and Time Preference and Expected Longevity on Demand for Medical Tests , 2004 .

[9]  John Mullahy,et al.  It&Apos;Ll Only Hurt a Second? Microeconomic Determinants of Who Gets Flu Shots , 1998, Health economics.

[10]  Victor Aguirregabiria,et al.  Swapping the Nested Fixed-Point Algorithm: a Class of Estimators for Discrete Markov Decision Models , 2002 .

[11]  Per Krusell,et al.  Equilibrium Welfare and Government Policy with Quasi-Geometric Discounting , 2001, J. Econ. Theory.

[12]  David Laibson,et al.  Estimating Discount Functions with Consumption Choices Over the Lifecycle , 2007 .

[13]  Ellen Meara,et al.  Impact of Medicare coverage on basic clinical services for previously uninsured adults. , 2003, JAMA.

[14]  Paul Schrimpf,et al.  IDENTIFICATION AND ESTIMATION OF DYNAMIC GAMES WITH CONTINUOUS STATES AND CONTROLS , 2011 .

[15]  Hanming Fang,et al.  On the compassion of time-limited welfare programs , 2004 .

[16]  Peter Arcidiacono,et al.  Finite Mixture Distributions, Sequential Likelihood and the EM Algorithm , 2003 .

[17]  Martin Pesendorfer,et al.  Asymptotic Least Squares Estimators for Dynamic Games , 2008 .

[18]  R. H. Strotz.  Myopia and Inconsistency in Dynamic Utility Maximization , 1955 .

[19]  Anthony A. Smith,et al.  Consumption--Savings Decisions with Quasi--Geometric Discounting , 2003 .

[20]  Victor Aguirregabiria,et al.  Pseudo Maximum Likelihood Estimation of Structural Models Involving Fixed-Point Problems , 2004 .

[21]  Sandra L. Decker.  Medicare and the Health of Women with Breast Cancer , 2005, The Journal of Human Resources.

[22]  Jonathan Gruber,et al.  Tax incidence when individuals are time-inconsistent: the case of cigarette excise taxes , 2004 .

[23]  J Z Ayanian,et al.  The relation between health insurance coverage and clinical outcomes among women with breast cancer. , 1994, The New England journal of medicine.

[24]  D. Quade,et al.  Measuring the use of mammography: two methods compared. , 1992, American journal of public health.

[25]  Robert J. Barro,et al.  Ramsey Meets Laibson in the Neoclassical Growth Model , 1999 .

[26]  A. Norets,et al.  Semiparametric Inference in Dynamic Binary Choice Models , 2012 .

[27]  Frank Partnoy,et al.  Patents as Options , 2011 .

[28]  V. J. Hotz,et al.  Conditional Choice Probabilities and the Estimation of Dynamic Models , 1993 .

[29]  J. T. Warner,et al.  The Personal Discount Rate: Evidence from Military Downsizing Programs , 2001 .

[30]  Ulrike Malmendier,et al.  Contract Design and Self-Control: Theory and Evidence , 2004 .

[31]  R. Pollak,et al.  SECOND-BEST NATIONAL SAVING AND GAME-EQUILIBRIUM GROWTH , 1980 .

[32]  Robert A. Miller.  Job Matching and Occupational Choice , 1984, Journal of Political Economy.

[33]  D. Andrews.  Testing When a Parameter Is on the Boundary of the Maintained Hypothesis , 2001 .

[34]  Stephen L. Parente,et al.  The Role of Consumer Knowledge of Insurance Benefits in the Demand for Preventative Health , 2003 .

[35]  H. Kasahara,et al.  Nonparametric Identification of Finite Mixture Models of Dynamic Discrete Choices , 2009 .

[36]  Steven T. Berry,et al.  Simple Estimators for the Parameters of Discrete Dynamic Games (with Entry/Exit Examples) , 2004 .

[37]  D. Salkever,et al.  The role of consumer knowledge of insurance benefits in the demand for preventive health care among the elderly. , 2005, Health economics.

[38]  F. A. Hayek.  The American Economic Review , 2007 .

[39]  Jeffrey M. Woodbridge.  Econometric Analysis of Cross Section and Panel Data , 2002 .

[40]  Victor Aguirregabiria,et al.  Dynamic Discrete Choice Structural Models: A Survey , 2010, SSRN Electronic Journal.

[41]  Victor Aguirregabiria,et al.  Sequential Estimation of Dynamic Discrete Games , 2007 .

[42]  C. Hsieh,et al.  Health Information and the Demand for Preventive Care among the Elderly in Taiwan , 1997 .

[43]  K. Wolpin.  An Estimable Dynamic Stochastic Model of Fertility and Child Mortality , 1984, Journal of Political Economy.

[44]  A. Mas-Colell.  The Theory Of General Economic Equilibrium , 1985 .

[45]  R. Suzman,et al.  An Overview of the Health and Retirement Study , 1995 .

[46]  A. Pakes,et al.  Computing Markov Perfect Nash Equilibria: Numerical Implications of a Dynamic Differentiated Product Model , 1992 .

[47]  Ulrike Malmendier,et al.  Paying Not to Go to the Gym , 2006 .

[48]  John Rust,et al.  Estimation of Dynamic Structural Models: Problems and Prospects , 1991 .

[49]  P. A. P. Moran,et al.  Maximum-likelihood estimation in non-standard conditions , 1971, Mathematical Proceedings of the Cambridge Philosophical Society.

[50]  Peter S. Arcidiacono,et al.  Conditional Choice Probability Estimation of Dynamic Discrete Choice Models With Unobserved Heterogeneity , 2011 .

[51]  K. DonaldW..  Generalized Method of Moments Estimation When a Parameter Is on a Boundary , 1999 .

[52]  T. Philipson,et al.  Private Vaccination and Public Health: An Empirical Examination for U.S. Measles , 1996 .

[53]  John Rust,et al.  Structural estimation of markov decision processes , 1986 .

[54]  D. Kenkel,et al.  Consumer Health Information and the Demand for Medical Care , 1990 .

[55]  G. Ainslie.  Picoeconomics: The Strategic Interaction of Successive Motivational States within the Person , 1992 .

[56]  T. Magnac,et al.  Identifying Dynamic Discrete Decision Processes , 2002 .

[57]  Jerry A. Hausman,et al.  Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables , 1979 .

[58]  V. Joseph Hotz,et al.  The Responsiveness of the Demand for Condoms to the Local Prevalence of AIDS , 1996 .

[59]  John Rust.  Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher , 1987 .

[60]  M. Paserman.  Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation , 2004, SSRN Electronic Journal.

[61]  J. Elster,et al.  Choice Over Time , 1992 .

[62]  P Thompson,et al.  Screening and preventable illness. , 2001, Journal of health economics.

[63]  Hanming Fang,et al.  Distinguishing Between Cognitive Biases: Beliefs vs. Time Discounting in Welfare Program Participation ∗ , 2004 .

[64]  David I. Laibson,et al.  Golden Eggs and Hyperbolic Discounting , 1997 .

[65]  R. Peeters.  Hyperbolic discounting in stochastic games , 2004 .

[66]  J. D. Carrillo,et al.  Strategic Ignorance as a Self-Disciplining Device , 2000 .

[67]  Peter D. Sozou,et al.  On hyperbolic discounting and uncertain hazard rates , 1998, Proceedings of the Royal Society of London. Series B: Biological Sciences.

[68]  Matthew Rabin,et al.  Addiction and self-control , 1999 .

[69]  Aprajit Mahajan,et al.  Time Inconsistency, Expectations and Technology Adoption: The Case of Insecticide Treated Nets , 2011 .