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Nonparametric estimation of utility function in first-price sealed-bid auctions

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  • Kim, Dong-Hyuk

Abstract

I propose a simple method to nonparametrically estimate the utility function in first-price, sealed-bid auctions when bidders’ participation is exogenous. Using a pair of bid densities, each for a different number of bidders, I establish a contraction mapping that converges to the true utility function. The method employs nonparametric estimates in place of the true bid densities to construct the contraction mapping and computes the utility function by iterating the contraction operator. A Monte Carlo study shows that the method approximates the true utility function and valuation density.

Suggested Citation

  • Kim, Dong-Hyuk, 2015. "Nonparametric estimation of utility function in first-price sealed-bid auctions," Economics Letters, Elsevier, vol. 126(C), pages 101-106.
    • Handle: RePEc:eee:ecolet:v:126:y:2015:i:c:p:101-106
    DOI: 10.1016/j.econlet.2014.11.026
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    References listed on IDEAS

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    Cited by:

    1. Jun, Sung Jae & Zincenko, Federico, 2022. "Testing for risk aversion in first-price sealed-bid auctions," Journal of Econometrics, Elsevier, vol. 226(2), pages 295-320.
    2. Zhang, Yu Yvette, 2022. "Nonparametric estimation of first price auctions via density–quantile function," Economics Letters, Elsevier, vol. 216(C).
    3. Luo, Yao, 2020. "Unobserved heterogeneity in auctions under restricted stochastic dominance," Journal of Econometrics, Elsevier, vol. 216(2), pages 354-374.
    4. Shi, Haolun & Yin, Guosheng, 2018. "Boosting conditional logit model," Journal of choice modelling, Elsevier, vol. 26(C), pages 48-63.
    5. Zhang, Yu Yvette, 2017. "A shape constrained estimator of bidding function of first-price sealed-bid auctions," Economics Letters, Elsevier, vol. 150(C), pages 67-72.
    6. Grundl, Serafin & Zhu, Yu, 2019. "Identification and estimation of risk aversion in first-price auctions with unobserved auction heterogeneity," Journal of Econometrics, Elsevier, vol. 210(2), pages 363-378.

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    More about this item

    Keywords

    First price auction; Nonparametric estimation; Risk aversion;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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