A test of the extreme value type I assumption in the bus engine replacement model

This note tests the assumption of dynamic discrete choice models that underlying utility shocks have an extreme value type I distribution. We find that extreme value type I shocks cannot be rejected in most specifications of the Rust (1987) bus engine replacement model. ► We test the extreme value type I (EVI) assumption of dynamic discrete choice models. ► Flexible distributions detect skewness and kurtosis not detected using EVI. ► In most specifications, EVI shocks cannot be rejected. ► When EVI shocks are rejected, significantly different predictions obtain at some states.