Bayesian estimation approaches to first-price auctions

Kumbhakar, Subal C. and Parmeter, Christopher F. and Tsionas, Michael (2012) Bayesian estimation approaches to first-price auctions. Journal of Econometrics, 168 (1). pp. 47-59. ISSN 0304-4076

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This paper considers Bayesian estimation strategies for first-price auctions within the independent private value paradigm. We develop an ‘optimization’ error approach that allows for estimation of values assuming that observed bids differ from optimal bids. We further augment this approach by allowing systematic over or underbidding by bidders using ideas from the stochastic frontier literature. We perform a simulation study to showcase the appeal of the method and apply the techniques to timber auction data collected in British Columbia. Our results suggest that significant underbidding is present in the timber auctions.

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Journal Article
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Journal of Econometrics
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18 Jun 2013 08:49
Last Modified:
21 Nov 2022 23:56