Working Paper: NBER ID: w20022
Authors: Ariel Pakes
Abstract: Empirical work on choice models, especially work on relatively new topics or data sets, often starts with descriptive, or what is often colloquially referred to as "reduced form", results. Our descriptive form formalizes this process. It is derived from the underlying behavioral model, has an interpretation in terms of fit, and can sometimes be used to quantify biases in agents' expectations. We consider estimators for the descriptive form of discrete choice models with (and without) interacting agents that take account of approximation errors as well as unobservable sources of endogeneity. We conclude with an investigation of the descriptive form of two period entry models.
Keywords: choice models; behavioral economics; descriptive forms; expectations; endogeneity
JEL Codes: B4; C51; C57
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| expected value generated by the data generating process (DGP) (C51) | agents' perceptions of outcomes (L85) |
| agents' expectations are biased (D84) | descriptive form reveals the nature and extent of this bias (D91) |
| descriptive form (Y20) | meaningful summary of the relationships between variables affecting agents' choices (D80) |
| parameters of the descriptive form can be tested for unbiasedness (C51) | quantify biases in agents' expectations based on conditional variables (D80) |
| relationship between descriptive and behavioral forms (C99) | inform about agents' decision-making processes (D80) |