Identification And Estimation Of Risk Aversion In First Price Auctions With Unobserved Auction Heterogeneity
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Identification And Estimation Of Risk Aversion In First Price Auctions With Unobserved Auction Heterogeneity
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Author : Serafin Grundi
language : en
Publisher:
Release Date : 2016
Identification And Estimation Of Risk Aversion In First Price Auctions With Unobserved Auction Heterogeneity written by Serafin Grundi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with Auctions categories.
This paper shows point identification in first-price auction models with risk aversion and unobserved auction heterogeneity by exploiting multiple bids from each auction and variation in the number of bidders. The required exclusion restriction is shown to be consistent with a large class of entry models. If the exclusion restriction is violated, but weaker restrictions hold instead, the same identification strategy still yields valid bounds for the primitives. We propose a sieve maximum likelihood estimator. A series of Monte Carlo experiments illustrate that the estimator performs well in finite samples and that ignoring unobserved auction heterogeneity can lead to a significant bias in risk-aversion estimates. In an application to U.S. Forest Service timber auctions we find that the bidders are risk neutral, but we would reject risk neutrality without accounting for unobserved auction heterogeneity.
Identification And Estimation Of Risk Aversion In First Price Auctions With Unobserved Auction Heterogeneity
DOWNLOAD
Author : Serafin Grundi
language : en
Publisher:
Release Date : 2016
Identification And Estimation Of Risk Aversion In First Price Auctions With Unobserved Auction Heterogeneity written by Serafin Grundi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with Auctions categories.
This paper shows point identification in first-price auction models with risk aversion and unobserved auction heterogeneity by exploiting multiple bids from each auction and variation in the number of bidders. The required exclusion restriction is shown to be consistent with a large class of entry models. If the exclusion restriction is violated, but weaker restrictions hold instead, the same identification strategy still yields valid bounds for the primitives. We propose a sieve maximum likelihood estimator. A series of Monte Carlo experiments illustrate that the estimator performs well in finite samples and that ignoring unobserved auction heterogeneity can lead to a significant bias in risk-aversion estimates. In an application to U.S. Forest Service timber auctions we find that the bidders are risk neutral, but we would reject risk neutrality without accounting for unobserved auction heterogeneity.
Identification And Estimation Of Risk Aversion In First Price Auctions With Unobserved Auction Heterogeneity
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Author :
language : en
Publisher:
Release Date : 2016
Identification And Estimation Of Risk Aversion In First Price Auctions With Unobserved Auction Heterogeneity written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
This paper shows point identification in first-price auction models with risk aversion and unobserved auction heterogeneity by exploiting multiple bids from each auction and variation in the number of bidders. The required exclusion restriction is shown to be consistent with a large class of entry models. If the exclusion restriction is violated, but weaker restrictions hold instead, the same identification strategy still yields valid bounds for the primitives. We propose a sieve maximum likelihood estimator. A series of Monte Carlo experiments illustrate that the estimator performs well in finite samples and that ignoring unobserved auction heterogeneity can lead to a significant bias in risk-aversion estimates. In an application to U.S. Forest Service timber auctions we find that the bidders are risk neutral, but we would reject risk neutrality without accounting for unobserved auction heterogeneity.
Essays On Empirical Auctions And Related Econometrics
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Author :
language : en
Publisher:
Release Date : 2014
Essays On Empirical Auctions And Related Econometrics written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
The first chapter studies identification and estimation of first-price auctions if the bidders face ambiguity about the distribution of valuations. Ambiguity is modeled using Gilboa and Schmeidler's (1989) Maxmin Expected Utility preferences. We exploit variation in the number of bidders to identify the essential primitives of the model. The identification result yields a closed form for the inverse bid function, which suggests a two-step estimation procedure. We study asymptotic and finite sample properties of the estimators. We find evidence of ambiguity in USFS timber auctions which leads to aggressive bidding for bidders with high valuations and has important implications for auction design. The second chapter proposes a procedure to test restrictions on infinite-dimensional parameters (partially) identified by unconditional or conditional moment equalities. Our new method allows us to test restrictions involving a continuum of inequalities. Examples of such restrictions include weakly increasing, concavity and first-order stochastic dominance. We show that our testing procedure controls size uniformly and has power approaching 1 against fixed alternatives. We conduct Monte Carlo Experiments to study the finite sample properties of our procedure. The third chapter studies the inference problem of bidders' risk attitudes in Independent Private Value (IPV) first-price auctions with multiplicative auction-level unobserved heterogeneity. Bidders are assumed to have Constant Relative Risk Aversion. Under the exclusion restriction that bidders randomly select themselves into auctions given the auction-level unobserved heterogeneity, bidders' CRRA coefficient is point-identified from bid data of auctions with at least two different number of active bidders. Our exclusion restriction is consistent with a variety of models with endogenous entry. Empirical application to USFS timber auctions shows that we will conclude that timber firms are risk averse if we ignoring the unobserved heterogeneity. But once we take the unobserved heterogeneity into account, risk neutrality is consistent with the data.
Nonparametric Identification Of First Price Auctions With Non Separable Unobserved Heterogeneity
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Author : David McAdams
language : en
Publisher:
Release Date : 2010
Nonparametric Identification Of First Price Auctions With Non Separable Unobserved Heterogeneity written by David McAdams and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
We propose a novel methodology for nonparametric identification of first-price auction models with independent private values, which allows for one-dimensional auction-specific unobserved heterogeneity, based on recent results from the econometric literature on nonclassical measurement error in Hu and Schennach (2008). Our approach can accommodate a wide variety of applications in which some location of the conditional distribution of bids (e.g. min or max of the support, mean, etc.) is increasing in the unobserved heterogeneity. This includes settings in which the econometrician fails to observe the reserve price, the cost of bidding, the number of bidders, or some factor (“quality”) with a non-linear effect on bidder values.
Unobserved Heterogeneity In Auctions
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Author : Philip A. Haile
language : en
Publisher:
Release Date : 2018
Unobserved Heterogeneity In Auctions written by Philip A. Haile and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
A common concern in the empirical study of auctions is the likely presence of auction-specific factors that are common knowledge among bidders but unobserved to the econometrician. Such unobserved heterogeneity confounds attempts to uncover the underlying structure of demand and information, typically a primary feature of interest in an auction market. Unobserved heterogeneity presents a particular challenge in first-price auctions, where identification arguments rely on the econometrician's ability to reconstruct from observables the conditional probabilities that entered each bidder's equilibrium optimization problem; when bidders condition on unobservables, it is not obvious that this is possible. Here we discuss several approaches to identification developed in recent work on first-price auctions with unobserved heterogeneity. Despite the special challenges of this setting, all of the approaches build on insights developed in other areas of econometrics, including those on control functions, measurement error, and mixture models. Because each strategy relies on different combinations of model restrictions, technical assumptions, and data requirements, their relative attractiveness will vary with the application. However, this varied menu of results suggests both a type of robustness of identifiability and the potential for expanding the frontier with additional work.
Asymmetry And Risk Aversion In First Price Sealed Bid Auctions
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Author : Sandra Campo
language : en
Publisher:
Release Date : 2002
Asymmetry And Risk Aversion In First Price Sealed Bid Auctions written by Sandra Campo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with categories.
Essays In Industrial Organization
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Author :
language : en
Publisher:
Release Date : 2014
Essays In Industrial Organization written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Chapter 1 Retail prices are volatile and decrease over time in many markets for differentiated durable goods. Consumers in these markets have an incentive to delay their purchase and wait for lower prices. This chapter uses a novel data set from a price alert service for TVs sold on Amazon.com to estimate substitution patterns across products and over time. Users of a price alert service submit a price threshold for a product they want to purchase and receive an alert when their threshold is reached. I estimate consumer preferences using a discrete/continuous-choice model in which the price threshold is the solution to an optimal stopping problem. The importance of taking dynamics into account is shown by comparing the own-price elasticities in the dynamic model to a counterfactual with myopic consumers and to estimates from a static model. Chapter 2 This chapter studies identification and estimation of first-price auctions if the bidders face ambiguity about the distribution of valuations. Ambiguity is modeled using Gilboa and Schmeidler's (1989) Maxmin Expected Utility preferences. We exploit variation in the number of bidders to identify the essential primitives of the model. The identification result yields a closed form for the inverse bid function, which suggests a two-step estimation procedure. We study asymptotic and finite sample properties of the estimators. We find evidence of ambiguity in USFS timber auctions which leads to aggressive bidding for bidders with high valuations and has important implications for auction design. Chapter 3 This chapter studies inference for first price auctions with risk averse bidders and an unobserved auction characteristic. Bidders are assumed to have Constant Relative Risk Aversion (CRRA). We exploit variation in the number of bidders to identify the primitives and show that our identifying assumption is compatible with common models of entry. We demonstrate that ignoring unobserved heterogeneity can lead to significant over-estimation of the CRRA coefficient.
Empirical Relevance Of Ambiguity In First Price Auctions
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Author : Gaurab Aryal
language : en
Publisher:
Release Date : 2018
Empirical Relevance Of Ambiguity In First Price Auctions written by Gaurab Aryal and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
We study the identification and estimation of first-price auctions with independent private values if bidders face ambiguity about the valuation distribution and have maxmin expected utility. Using variation in the number of bidders we nonparametrically identify the true valuation distribution and the lower envelope of the set of prior beliefs. We also allow for CRRA and unobserved auction heterogeneity, and propose a Bayesian estimation method based on Bernstein polynomials. Monte Carlo experiments show that our estimator performs well, and incorrectly ignoring ambiguity induces bias and loss of revenue. We find evidence of ambiguity in timber auctions in the Pacific Northwest.
Unobserved Heterogeneity And Reserve Prices In Auctions
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Author : James W. Roberts
language : en
Publisher:
Release Date : 2010
Unobserved Heterogeneity And Reserve Prices In Auctions written by James W. Roberts and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
This study addresses the need to account for unobserved heterogeneity in auctions to improve our estimates of the distribution of bidder values. The method uses reserve prices to allow the distribution of bidders' private information to depend on the realization of the unobserved heterogeneity. The identifying assumption is that reserve prices are monotonic in the realization of unobserved heterogeneity and sellers are not required to set reserve prices optimally. The model can be estimated using only transaction prices. The paper proposes an estimation method and derives the asymptotic distribution of the proposed estimator. Working with data on used car auctions, the paper shows that controlling for unobserved heterogeneity affects estimates of the distribution of bidder values and impacts predicted outcomes dramatically.