Temporal-Difference estimation of dynamic discrete choice models

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Tác giả: Karun Adusumilli, Dita Eckardt

Ngôn ngữ: eng

Ký hiệu phân loại: 003.56 Decision theory

Thông tin xuất bản: 2019

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Bộ sưu tập: Metadata

ID: 163741

We study the use of Temporal-Difference learning for estimating the structural parameters in dynamic discrete choice models. Our algorithms are based on the conditional choice probability approach but use functional approximations to estimate various terms in the pseudo-likelihood function. We suggest two approaches: The first - linear semi-gradient - provides approximations to the recursive terms using basis functions. The second - Approximate Value Iteration - builds a sequence of approximations to the recursive terms by solving non-parametric estimation problems. Our approaches are fast and naturally allow for continuous and/or high-dimensional state spaces. Furthermore, they do not require specification of transition densities. In dynamic games, they avoid integrating over other players' actions, further heightening the computational advantage. Our proposals can be paired with popular existing methods such as pseudo-maximum-likelihood, and we propose locally robust corrections for the latter to achieve parametric rates of convergence. Monte Carlo simulations confirm the properties of our algorithms in practice.
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