Mixed Hitting-Time Models

Author

Jaap H. Abbring, Visiting Fellow Tilburg University

Abstract

We study a mixed hitting-time (MHT) model that speci.es durations as the .rst time a Lévy process— a continuous-time process with stationary and independent increments— crosses a heterogeneous threshold. Such models are of substantial interest because they can be reduced from optimal-stopping models with heterogeneous agents that do not naturally produce a mixed proportional hazards (MPH) structure. We show how strategies for analyzing the MPH model’s identifiability can be adapted to prove identifiability of an MHT model with observed regressors and unobserved heterogeneity. We discuss inference from censored data and give some simple examples of structural applications. We conclude by discussing the relative merits of the MHT and MPH models as complementary frameworks for econometric duration analysis.