Estimation of Dynamic Discrete Choice Models in Continuous Time with an Application to Retail Competition

Arcidiacono, Peter; Bayer, Patrick; Blevins, Jason R.; Ellickson, Paul B.

doi:10.1093/restud/rdw012

Cited by 78 publications

(80 citation statements)

References 70 publications

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“…These numbers are calculated for the population who in 2004 lived in New Orleans and had a home mortgage, the best available proxy for home ownership, using quarterly residence-location data from the NYFRB Equifax Consumer Credit Panel. 26 For recent advances in dealing with large state space problems in dynamic discrete-choice settings, see, for example, Arcidiacono et al (2016). where z j(i) t γ captures heterogeneity in amenity values across blocks based on predetermined block observable characteristics (z), including flood exposure, pre-Katrina demographic composition, and a linear time trend to capture city-wide improvements in infrastructure. 27 b j ∼ N(0 σ 2 b ) captures heterogeneity in block amenity values unobservable to the researcher.…”

Section: Exogenous Neighborhood Amenitiesmentioning

confidence: 99%

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Estimation of an Equilibrium Model With Externalities: Post‐Disaster Neighborhood Rebuilding

Gregory

2019

ECTA

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We study the optimal design of subsidies in an equilibrium setting, where the decisions of individual recipients impose externalities on one another. We apply the model to the case of post‐Katrina rebuilding in New Orleans under the Louisiana Road Home rebuilding grant program (RH). We estimate the structural model via indirect inference, exploiting a discontinuity in the formula for determining the size of grants, which helps isolate the causal effect of neighbors' rebuilding on one's own rebuilding choices. We find that the additional rebuilding induced by RH generated positive externalities equivalent to $4950 to each inframarginal household whose rebuilding choice was not affected by the program. Counterfactual policy experiments find that optimal subsidy policies bias grant offers against relocation, with an inverse‐U‐shaped relationship between the degree of bias and the severity of damages from the disaster.

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Section: Exogenous Neighborhood Amenitiesmentioning

confidence: 99%

“… For recent advances in dealing with large state space problems in dynamic discrete‐choice settings, see, for example, Arcidiacono et al (). …”

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confidence: 99%

Estimation of an Equilibrium Model With Externalities: Post‐Disaster Neighborhood Rebuilding

Gregory

2019

ECTA

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“…First, among many papers that study entry, Arcidiacono, Bayer, Blevins, and Ellickson (2015) is the most closely related work in terms of modeling, because they also consider entry dynamics of oligopolistic chain stores. Whereas their main objective is to propose and illustrate the use of a continuous-time framework, we focus on addressing unobserved market heterogeneity and assessing the implications of cannibalization and preemption on market structure.…”

Section: Related Literaturementioning

confidence: 99%

Unobserved heterogeneity in dynamic games: Cannibalization and preemptive entry of hamburger chains in Canada

Igami

Yang

2016

Quantitative Economics

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We develop a dynamic entry model of multi-store oligopoly with heterogeneous markets, and estimate it using data on hamburger chains in Canada (1970Canada ( -2005. Because more lucrative markets attract more entry, firms appear to favor the presence of more rivals. Thus unobserved heterogeneity across geographical markets creates an endogeneity problem and poses a methodological challenge in the estimation of dynamic games, which we address by combining the procedures proposed by Kasahara and Shimotsu (2009), Arcidiacono and Miller (2011), and Bajari, Benkard, and Levin (2007. The results suggest that the omission of unobserved market heterogeneity attenuates the estimates of competition, and the trade-off between cannibalization and preemption is an important factor behind the evolution of market structure.

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“…Recent papers propose different approaches to deal with this dimensionality problem in the state space. Arcidiacono et al (2013) present a continuous-time dynamic game of spatial competition in a retail industry and propose an estimation method of this model. The continuous-time assumption eliminates the curse of dimensionality associated to integration over the state space.…”

Section: Computationmentioning

confidence: 99%

Empirical games of market entry and spatial competition in retail industries

Aguirregabiria¹,

Suzuki²

2016

Handbook on the Economics of Retailing and Distribution

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We survey the recent empirical literature on structural models of market entry and spatial competition in oligopoly retail industries. We start with the description of a framework that encompasses various models that have been estimated in empirical applications. We use this framework to discuss important specification assumptions in this literature: firm heterogeneity; specification of price competition; structure of spatial competition; firms' information; dynamics; multi-store firms; and structure of unobservables. We next describe different types of datasets that have been used in empirical applications. Finally, we discuss econometric issues that researchers should deal with in the estimation of these models, including multiple equilibria and unobserved market heterogeneity. We comment on the advantages and limitations of alternative estimation methods, and how these methods relate to identification restrictions. We conclude with some issues and topics for future research.

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Estimation of Dynamic Discrete Choice Models in Continuous Time with an Application to Retail Competition

Cited by 78 publications

References 70 publications

Estimation of an Equilibrium Model With Externalities: Post‐Disaster Neighborhood Rebuilding

Estimation of an Equilibrium Model With Externalities: Post‐Disaster Neighborhood Rebuilding

Unobserved heterogeneity in dynamic games: Cannibalization and preemptive entry of hamburger chains in Canada

Empirical games of market entry and spatial competition in retail industries

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