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A shape constrained estimator of bidding function of first-price sealed-bid auctions

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  • Zhang, Yu Yvette

Abstract

This paper is concerned with economic analysis of first-price sealed-bid auctions with risk averse bidders. The identification is based on exogenous variations in the number of bidders across auctions. We present a shape constrained estimator of the bidding function, which satisfies the theoretical properties of passing through origin, positivity and monotonicity. The underlying utility function and bidder value distribution are readily obtained from the estimated bidding function. Monte Carlo simulations demonstrate good performance of the proposed estimator.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:ecolet:v:150:y:2017:i:c:p:67-72
    DOI: 10.1016/j.econlet.2016.11.001
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    References listed on IDEAS

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    1. Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2000. "Optimal Nonparametric Estimation of First-Price Auctions," Econometrica, Econometric Society, vol. 68(3), pages 525-574, May.
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    3. Elodie Guerre & I. Perrigne & Q.H. Vuong, 2000. "Optimal nonparametric estimation of first-price auctions [[Estimation nonparamétrique optimale des enchères au premier prix]]," Post-Print hal-02697497, HAL.
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    7. Zincenko, Federico, 2018. "Nonparametric estimation of first-price auctions with risk-averse bidders," Journal of Econometrics, Elsevier, vol. 205(2), pages 303-335.
    8. Kim, Dong-Hyuk, 2015. "Nonparametric estimation of utility function in first-price sealed-bid auctions," Economics Letters, Elsevier, vol. 126(C), pages 101-106.
    9. Jingfeng Lu & Isabelle Perrigne, 2008. "Estimating risk aversion from ascending and sealed-bid auctions: the case of timber auction data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(7), pages 871-896.
    10. 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.
    11. Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2009. "Nonparametric Identification of Risk Aversion in First-Price Auctions Under Exclusion Restrictions," Econometrica, Econometric Society, vol. 77(4), pages 1193-1227, July.
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    More about this item

    Keywords

    First-price auctions; Bidding functions; Risk aversion; Shaped constrained estimator;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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