How long to own and how much to use a car? A dynamic discrete choice model to explain holding duration and driven mileage

We develop a dynamic discrete choice model of car holding duration and use for French households owning only one car over the 2000–2007 period. We consider income, fuel prices and cumulated mileage as stochastic state variables. It is found that accounting for forward-looking economic agents greatly improves the understanding of the underlying logic that drives such choices whenever theoretical assumptions and used data may appear as a sketchy description of a more complex reality.