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Identification and Estimation of Seller Risk Aversion in Ascending Auctions

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  • Nathalie Gimenes
  • Tonghui Qi
  • Sorawoot Srisuma

Abstract

How sellers choose reserve prices is central to auction theory, and the optimal reserve price depends on the seller's risk attitude. Numerous studies have found that observed reserve prices lie below the optimal level implied by risk-neutral sellers, while the theoretical literature suggests that risk-averse sellers can rationalize these empirical findings. In this paper, we develop an econometric model of ascending auctions with a risk-averse seller under independent private values. We provide primitive conditions for the identification of the Arrow-Pratt measures of risk aversion and an estimator for these measures that is consistent and converges in distribution to a normal distribution at the parametric rate under standard regularity conditions. A Monte Carlo study demonstrates good finite-sample performance of the estimator, and we illustrate the approach using data from foreclosure real estate auctions in S\~{a}o Paulo.

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  • Nathalie Gimenes & Tonghui Qi & Sorawoot Srisuma, 2025. "Identification and Estimation of Seller Risk Aversion in Ascending Auctions," Papers 2509.19945, arXiv.org.
    • Handle: RePEc:arx:papers:2509.19945
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    References listed on IDEAS

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