Identification of Time-Inconsistent Models: The Case of Insecticide Treated Nets / Aprajit Mahajan, Christian Michel, Alessandro Tarozzi.

Format:

Book

Author/Creator:

Mahajan, Aprajit.

Contributor:

National Bureau of Economic Research.

Michel, Christian.

Tarozzi, Alessandro.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27198.

NBER working paper series no. w27198

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

Time-inconsistency may play a central role in explaining inter-temporal behavior, particularly among poor households. However, little is known about the distribution of time-inconsistent agents, and time-preference parameters are typically not identified in standard dynamic choice models. We formulate a dynamic discrete choice model in an unobservedly heterogeneous population of possibly time-inconsistent agents. We provide conditions under which all population type probabilities and preferences for both time-consistent and sophisticated agents are point-identified and sharp set-identification results for naïve and partially sophisticated agents. Estimating the model using data from a health intervention providing insecticide treated nets (ITNs) in rural Orissa, India, we find that a little over two-thirds of our sample comprises time-inconsistent agents and that both sophisticated and naïve agents are considerably present-biased. Counterfactuals show that the under-investment in ITNs attributable to present-bias leads to substantial costs that are about five times the price of an ITN.

Notes:

Print version record

May 2020.