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

S. Campo; Emmanuel Guerre; I. Perrigne; Q. Vuong

doi:10.1093/restud/rdq001

Review of Economic Studies Vol. 78 No. 1 2011

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

S. Campo^{1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16}; Emmanuel Guerre^{8,12,1,9,7,11,5,6,13,16,3,14,10,15,2,4}; I. Perrigne^{3,11,7,2,1,14,5,6,9,10,16,8,15,12,13,4}; Q. Vuong^{8,13,12,11,4,7,2,15,1,3,6,10,16,9,14,5}

¹ Princeton University · ² University of Cambridge · ³ University of Pittsburgh · ⁴ University of Rochester · ⁵ Cornell University · ⁶ Pennsylvania State University · ⁷ Centre de Recherche en Économie et Statistique · ⁸ University of Oxford · ⁹ Sorbonne Université · ¹⁰ California Southern University · ¹¹ New York University · ¹² Centre for Research in Engineering Surface Technology · ¹³ University of California, Los Angeles · ¹⁴ Rutgers, The State University of New Jersey · ¹⁵ Université Paris Cité · ¹⁶ University of Southern California

Abstract

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.

DOI: 10.1093/restud/rdq001
Volume: 78
Issue: 1
Pages: 112-147
Language: en
Sources: bibtex:phds-export.bib openalex crossref

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

Abstract

Cite