Bayesian estimation approaches to first-price auctions
AbstractThis paper considers Bayesian estimation strategies for first-price auctions within the independent private value paradigm. We develop an ‘optimization’ error approach that allows for estimation of values assuming that observed bids differ from optimal bids. We further augment this approach by allowing systematic over or underbidding by bidders using ideas from the stochastic frontier literature. We perform a simulation study to showcase the appeal of the method and apply the techniques to timber auction data collected in British Columbia. Our results suggest that significant underbidding is present in the timber auctions.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Econometrics.
Volume (Year): 168 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/jeconom
Posterior distribution; Bidding strategy; Markov Chain Monte Carlo; Stochastic frontier; Gibbs sampling;
Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
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