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

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  • Lu, Jingfeng
  • Perrigne, Isabelle

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.

Suggested Citation

  • Lu, Jingfeng & Perrigne, Isabelle, 2006. "Estimating risk aversion from ascending and sealed-bid auctions: the case of timber auction data," MPRA Paper 948, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:948
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    References listed on IDEAS

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    More about this item

    Keywords

    Risk Aversion; Nonparametric Identi.cation; Nonparametric and Semipara-metric Estimation; Timber Auctions;
    All these keywords.

    JEL classification:

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

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