Identification and estimation in first-price auctions with risk-averse bidders and selective entry

Arbeitspapier

We study identification and estimation in first-price auctions with risk-averse bidders and selective entry, building on a flexible entry and bidding framework we call the Affiliated Signal with Risk Aversion (AS-RA) model. This framework extends the AS model of Gentry and Li (2014) to accommodate arbitrary bidder risk aversion, thereby nesting a variety of standard models as special cases. It poses, however, a unique methodological challenge - existing results on identification with risk aversion fail in the presence of selection, while the selection-robust bounds of Gentry and Li (2014) fail in the presence of risk aversion. Motivated by this problem, we translate excludable variation in potential competition into identified sets for AS-RA primitives under various classes of restrictions on the model. We show that a single parametric restriction - on the copula governing selection into entry - is typically sufficient to restore point identification of all primitives. In contrast, a parametric form for utility yields point identification of the utility function but only partial identification of remaining primitives. Finally, we outline a simple semiparametric estimator combining Constant Relative Risk Aversion utility with a parametric signal-value copula. Simulation evidence suggests that this estimator performs very well even in small samples, underscoring the practical value of our identification results.

Objekt anzeigen

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: cemmap working paper ; No. CWP16/15

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: Auctions ; endogenous participation ; risk aversion ; identification

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Gentry, Matthew ; Li, Tong ; Lu, Jingfeng
• Ereignis: Veröffentlichung
• (wer): Centre for Microdata Methods and Practice (cemmap)
• (wo): London
• (wann): 2015

Weitere Informationen

• DOI: doi:10.1920/wp.cem.2015.1615
• Handle: http://hdl.handle.net/10419/130027