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Semiparametric Estimation of the Optimal Reserve Price in First-Price Auctions

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  • Li, Tong
  • Perrigne, Isabelle
  • Vuong, Quang

Abstract

The optimal reserve price in the independent private value paradigm is generally expressed as a functional of the latent distribution of private signals, which is by nature unobserved. This feature has limited the implementation of the optimal reserve price in practice. In this article, we consider first-price auctions within the general affiliated private values paradigm. We show that the seller's expected profit can be written as a functional of the observed bid distribution. We propose a semiparametric extremum estimator for estimating consistently the optimal reserve price from observed bids. As an illustration, we consider the Outer Continental Shelf (OCS) wildcat auctions.

Suggested Citation

  • Li, Tong & Perrigne, Isabelle & Vuong, Quang, 2003. "Semiparametric Estimation of the Optimal Reserve Price in First-Price Auctions," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 53-64, January.
    • Handle: RePEc:bes:jnlbes:v:21:y:2003:i:1:p:53-64
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    Citations

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    Cited by:

    1. Zincenko, Federico, 2018. "Nonparametric estimation of first-price auctions with risk-averse bidders," Journal of Econometrics, Elsevier, vol. 205(2), pages 303-335.
    2. Seifert, Stefan & Hüttel, Silke, 2020. "Common values and unobserved heterogeneity in farmland auctions in Germany," FORLand Working Papers 21 (2020), Humboldt University Berlin, DFG Research Unit 2569 FORLand "Agricultural Land Markets – Efficiency and Regulation".
    3. Kim, Dong-Hyuk, 2013. "Optimal choice of a reserve price under uncertainty," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 587-602.
    4. Henderson, Daniel J. & List, John A. & Millimet, Daniel L. & Parmeter, Christopher F. & Price, Michael K., 2012. "Empirical implementation of nonparametric first-price auction models," Journal of Econometrics, Elsevier, vol. 168(1), pages 17-28.
    5. Hema Yoganarasimhan, 2016. "Estimation of Beauty Contest Auctions," Marketing Science, INFORMS, vol. 35(1), pages 27-54, January.
    6. Hickman Brent R. & Hubbard Timothy P. & Sağlam Yiğit, 2012. "Structural Econometric Methods in Auctions: A Guide to the Literature," Journal of Econometric Methods, De Gruyter, vol. 1(1), pages 67-106, August.
    7. Gimenes, Nathalie & Guerre, Emmanuel, 2022. "Quantile regression methods for first-price auctions," Journal of Econometrics, Elsevier, vol. 226(2), pages 224-247.
    8. Simon Stevenson & James Young, 2015. "The Role of Undisclosed Reserves in English Open Outcry Auctions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 375-402, June.
    9. Dominic Coey & Bradley Larsen & Kane Sweeney, 2019. "The bidder exclusion effect," RAND Journal of Economics, RAND Corporation, vol. 50(1), pages 93-120, March.
    10. Marmer, Vadim & Shneyerov, Artyom, 2012. "Quantile-based nonparametric inference for first-price auctions," Journal of Econometrics, Elsevier, vol. 167(2), pages 345-357.
    11. Hennessy, David A., 2006. "Multi-output firm under price uncertainty," Journal of Economics and Business, Elsevier, vol. 58(3), pages 181-201.
    12. Ma, Jun & Marmer, Vadim & Shneyerov, Artyom, 2019. "Inference for first-price auctions with Guerre, Perrigne, and Vuong’s estimator," Journal of Econometrics, Elsevier, vol. 211(2), pages 507-538.
    13. Lorentziadis, Panos L., 2016. "Optimal bidding in auctions from a game theory perspective," European Journal of Operational Research, Elsevier, vol. 248(2), pages 347-371.
    14. Hickman Brent R. & Hubbard Timothy P. & Sağlam Yiğit, 2012. "Structural Econometric Methods in Auctions: A Guide to the Literature," Journal of Econometric Methods, De Gruyter, vol. 1(1), pages 67-106, August.
    15. repec:vuw:vuwscr:19224 is not listed on IDEAS
    16. Dominic Coey & Bradley J. Larsen & Kane Sweeney & Caio Waisman, 2021. "Scalable Optimal Online Auctions," Marketing Science, INFORMS, vol. 40(4), pages 593-618, July.
    17. Nathalie Gimenes, 2014. "Econometrics of Ascending Auctions by Quantile Regression," Working Papers, Department of Economics 2014_25, University of São Paulo (FEA-USP).
    18. Sağlam, Yiğit, 2012. "Structural Econometric Methods in Auctions: A Guide to the Literature," Working Paper Series 19224, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.

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