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Inference of bidders’ risk attitudes in ascending auctions with endogenous entry

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  • Fang, Hanming
  • Tang, Xun
Abstract
Bidders’ risk attitudes have key implications for the choices of revenue-maximizing auction formats. In ascending auctions, bid distributions do not provide information about risk preference. We infer risk attitudes using distributions of transaction prices and participation decisions in ascending auctions with entry costs. Nonparametric tests are proposed for two distinct scenarios: first, the expected entry cost can be consistently estimated from the data; second, the data does not report entry costs but contains exogenous variation in potential competition and auction characteristics. We also show the identification of risk attitudes in ascending auctions with selective entry, where bidders receive entry-stage signals correlated with their values.

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  • Fang, Hanming & Tang, Xun, 2014. "Inference of bidders’ risk attitudes in ascending auctions with endogenous entry," Journal of Econometrics, Elsevier, vol. 180(2), pages 198-216.
    • Handle: RePEc:eee:econom:v:180:y:2014:i:2:p:198-216
    DOI: 10.1016/j.jeconom.2014.02.010
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Matthew Gentry & Tong Li & Jingfeng Lu, 2015. "Identification and estimation in first-price auctions with risk-averse bidders and selective entry," CeMMAP working papers CWP16/15, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    2. Nianqing Liu & Yao Luo, 2017. "A Nonparametric Test For Comparing Valuation Distributions In First‐Price Auctions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(3), pages 857-888, August.
    3. Xin Feng & Jingfeng Lu & Yeneng Sun, 2020. "Ex Ante Efficient Mechanism With Private Entry Costs," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1531-1541, July.
    4. Gentry, Matthew & Li, Tong & Lu, Jingfeng, 2015. "Existence of monotone equilibrium in first price auctions with private risk aversion and private initial wealth," Games and Economic Behavior, Elsevier, vol. 94(C), pages 214-221.
    5. repec:spo:wpecon:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    6. repec:hal:spmain:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    7. Luo, Yao, 2020. "Unobserved heterogeneity in auctions under restricted stochastic dominance," Journal of Econometrics, Elsevier, vol. 216(2), pages 354-374.
    8. Ma, Jun & Marmer, Vadim & Shneyerov, Artyom, 2019. "Inference for first-price auctions with Guerre, Perrigne, and Vuong’s estimator," Journal of Econometrics, Elsevier, vol. 211(2), pages 507-538.
    9. repec:hal:wpspec:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    10. Marleen Marra, 2024. "Estimating and Auction Platform Game with Two-Sided Entry," Working Papers hal-03393068, HAL.
    11. Xiaohong Chen & Matthew Gentry & Tong Li & Jingfeng Lu, 2020. "Identification and Inference in First-Price Auctions with Risk Averse Bidders and Selective Entry," Cowles Foundation Discussion Papers 2257, Cowles Foundation for Research in Economics, Yale University.
    12. Qunwei Wang & Cheng Cheng & Dequn Zhou, 2020. "Multi-round auctions in an emissions trading system considering firm bidding strategies and government regulations," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 25(7), pages 1403-1421, October.
    13. NAKABAYASHI Jun & HIROSE Yohsuke, 2016. "Structural Estimation of the Scoring Auction Model," Discussion papers 16008, Research Institute of Economy, Trade and Industry (RIETI).
    14. Tong Li & Jingfeng Lu & Li Zhao, 2015. "Auctions with selective entry and risk averse bidders: theory and evidence," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 524-545, September.
    15. Nianqing Liu & Yao Luo, 2014. "A Nonparametric Test of Exogenous Participation in First-Price Auctions," Working Papers tecipa-519, University of Toronto, Department of Economics.
    16. repec:spo:wpmain:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS

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    More about this item

    Keywords

    Ascending auctions; Risk attitudes; Endogenous entry; Tests;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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