Dynamic discrete choice

<p>Dynamic discrete choice (DDC) models, also known as discrete choice models of <a href="/facts/Dynamic_programming/CLcabtmk">dynamic programming</a>, model an agent's choices over discrete options that have future implications. Rather than assuming observed choices are the result of static utility maximization, observed choices in DDC models are assumed to result from an agent's maximization of the <a href="/facts/Present_value/1Ea8bdC2">present value</a> of utility, generalizing the <a href="/facts/Utility_theory/wlMDG74L">utility theory</a> upon which <a href="/facts/Discrete_choice/hSA6DKCX">discrete choice</a> models are based.
</p><p>The goal of DDC methods is to estimate the <a href="/facts/Structural_estimation/3bG4UIIX">structural parameters</a> of the agent's decision process. Once these parameters are known, the researcher can then use the estimates to simulate how the agent would behave in a counterfactual state of the world. (For example, how a prospective college student's enrollment decision would change in response to a tuition increase.)
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Dynamic discrete choice open-in-new

Dynamic discrete choice