Estimating risk aversion from ascending and sealed-bid auctions: the case of timber auction data

Lu, Jingfeng and Perrigne, Isabelle (2006): Estimating risk aversion from ascending and sealed-bid auctions: the case of timber auction data. Unpublished.

Abstract

Estimating bidders’ risk aversion in auctions is a challeging problem because of identification issues. This paper takes advantage of bidding data from two auction designs to identify nonparametrically the bidders’ utility function within a private value framework. In particular, ascending auction data allow us to recover the latent distribution of private values, while first-price sealed-bid auction data allow us to recover the bidders’ utility function. This leads to a nonparametric estimator. An application to the US Forest Service timber auctions is proposed. Estimated utility functions display concavity, which can be partly captured by constant relative risk aversion.

• Item Type: MPRA Paper
• Language: English
• Keywords: Risk Aversion; Nonparametric Identi.cation; Nonparametric and Semipara-metric Estimation; Timber Auctions
• Subjects: D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C14 - Semiparametric and Nonparametric Methods