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ESTIMATING DYNAMIC DISCRETE CHOICE MODELS WITH HYPERBOLIC DISCOUNTING, WITH AN APPLICATION TO MAMMOGRAPHY DECISIONS
Author(s) -
Fang Hanming,
Wang Yang
Publication year - 2015
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12115
Subject(s) - discounting , econometrics , estimation , discrete choice , hyperbolic discounting , identification (biology) , dynamic inconsistency , economics , computer science , mathematical economics , botany , management , finance , biology
We extend the semiparametric estimation method for dynamic discrete choice models using Hotz and Miller's ( Review of Economic Studies 60 (1993), 497–529) conditional choice probability approach to the setting where individuals may have hyperbolic discounting time preferences and may be naive about their time inconsistency. We illustrate the proposed identification and 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 underutilization of this preventive health care. Our results show evidence for both present bias and naivety.