Journal Article

Semiparametric Estimation of First-Price Auctions with Risk-Averse Bidders

Sandra Campo, Emmanuel Guerre, Isabelle Perrigne and Quang Vuong

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 78, issue 1, pages 112-147
Published in print January 2011 | ISSN: 0034-6527
Published online January 2011 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1093/restud/rdq001
Semiparametric Estimation of First-Price Auctions with Risk-Averse Bidders

More Like This

Show all results sharing these subjects:

  • Econometric and Statistical Methods and Methodology: General
  • Primary Products
  • Market Structure and Pricing

GO

Show Summary Details

Preview

In view of the non-identification of the first-price auction model with risk-averse bidders, this paper proposes some parametric identifying restrictions and a semiparametric estimator for the risk aversion parameter(s) and the latent distribution of private values. Specifically, we exploit heterogeneity across auctioned objects to establish semiparametric identification under a conditional quantile restriction of the bidders' private value distribution and a parameterization of the bidders' utility function. We develop a multistep semiparametric method and we show that our semiparametric estimator of the utility function parameter(s) converges at the optimal rate, which is slower than the parametric one but independent of the dimension of the exogenous variables thereby avoiding the curse of dimensionality. We then consider various extensions including a binding reserve price, affiliation among private values, and asymmetric bidders. The method is illustrated on U.S. Forest Service timber sales, and bidders' risk neutrality is rejected.

Keywords: Risk aversion; Private value; Semiparametric identification; Semiparametric estimation; Optimal rate; Timber auctions; C14; D44; L70

Journal Article.  12062 words.  Illustrated.

Subjects: Econometric and Statistical Methods and Methodology: General ; Primary Products ; Market Structure and Pricing

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.