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Bayesian estimation of bidding process and bidder’s preference under shape restrictions

Author

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  • Dong Li

    (The University of Texas at Dallas)

  • Luya Wang

    (The Capital University of Economics and Business)

  • Ximing Wu

    (Texas A&M University)

Abstract

This paper applies a novel nonparametric estimator to the modeling of auctions subject to shape restrictions. In particular, we employ a Bayesian estimator with a Gaussian process prior parameterized by a spectral representation. We use squared Gaussian processes to model the functional derivatives and therefore are able to impose global shape restrictions. Our first application is the estimation of a monotonically increasing bidding process of online auctions. The second application concerns the estimation of bidders’ risk-averse latent preferences in sealed-bid timber auctions. The results show that the shape-constrained estimator not only ensures the conformity with economic theories but also improves estimation precision.

Suggested Citation

  • Dong Li & Luya Wang & Ximing Wu, 2021. "Bayesian estimation of bidding process and bidder’s preference under shape restrictions," Empirical Economics, Springer, vol. 60(1), pages 157-176, January.
  • Handle: RePEc:spr:empeco:v:60:y:2021:i:1:d:10.1007_s00181-020-01932-1
    DOI: 10.1007/s00181-020-01932-1
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    References listed on IDEAS

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    1. J. O. Ramsay, 1998. "Estimating smooth monotone functions," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 60(2), pages 365-375.
    2. Yu Zhang & Jingping Gu & Qi Li, 2011. "Nonparametric panel estimation of online auction price processes," Empirical Economics, Springer, vol. 40(1), pages 51-68, February.
    3. Zincenko, Federico, 2018. "Nonparametric estimation of first-price auctions with risk-averse bidders," Journal of Econometrics, Elsevier, vol. 205(2), pages 303-335.
    4. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
    5. Yu Yvette Zhang & Ximing Wu & Qi Li, 2016. "A Simple Consistent Nonparametric Estimator of the Lorenz Curve," Advances in Econometrics, in: Essays in Honor of Aman Ullah, volume 36, pages 635-653, Emerald Group Publishing Limited.
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    Cited by:

    1. Qi Li & Vasilis Sarafidis & Joakim Westerlund, 2021. "Essays in honor of Professor Badi H Baltagi," Empirical Economics, Springer, vol. 60(1), pages 1-11, January.
    2. Li, Qi & Sarafidis, Vasilis & Westerlund, Joakim, 2020. "Essays in Honor of Professor Badi H Baltagi: Editorial," MPRA Paper 104751, University Library of Munich, Germany.

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