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An information–Theoretic approach to partially identified auction models

Author

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  • Jun, Sung Jae
  • Pinkse, Joris

Abstract

We consider a situation in which we have data from ascending auctions with symmetric bidders, independent private values, and exogenous entry in which the bidders’ value distribution is partially identified. Focusing on the case in which the seller intends to use a second price auction, we discuss how to determine an optimal reserve price. We justify the use of maximum entropy, explore the properties of the estimand, determine the asymptotic properties of our maximum entropy estimator, evaluate its behavior in a simulation study, and demonstrate its use in a modest application. As an extension, we propose a maxmin decision rule with entropy regularization, which includes Aryal and Kim (2013) and the maximum entropy solution as extreme cases.

Suggested Citation

  • Jun, Sung Jae & Pinkse, Joris, 2024. "An information–Theoretic approach to partially identified auction models," Journal of Econometrics, Elsevier, vol. 238(2).
    • Handle: RePEc:eee:econom:v:238:y:2024:i:2:s0304407623002828
    DOI: 10.1016/j.jeconom.2023.105566
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    Keywords

    English auctions; partial identification; maximum entropy; inequality constraints; nonparametric inference;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions

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