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arXiv · 2102.06076

Duality in dynamic discrete-choice models

Khai Xiang Chiong·Alfred Galichon·Matt Shum
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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.

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Khai Xiang Chiong, Alfred Galichon, Matt Shum. 2021-02-08. Duality in dynamic discrete-choice models. https://doi.org/10.3982/qe436

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