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Research Article
Estimating risk aversion from ascending and sealed-bid auctions: the case of timber auction data
Article first published online: 3 NOV 2008
DOI: 10.1002/jae.1032
Copyright © 2008 John Wiley & Sons, Ltd.
Issue
1099-1255/asset/cover.gif?v=1&s=b1b203dd8cf20555a0543e60a483d83867056b48 "Journal of Applied Econometrics")
Journal of Applied Econometrics
Special Issue: The Econometrics of Auctions
Volume 23, Issue 7, pages 871–896, November/December 2008
Additional Information
How to Cite
Lu, J. and Perrigne, I. (2008), Estimating risk aversion from ascending and sealed-bid auctions: the case of timber auction data. J. Appl. Econ., 23: 871–896. doi: 10.1002/jae.1032
Publication History
- Issue published online: 26 NOV 2008
- Article first published online: 3 NOV 2008
- Manuscript Revised: 1 JUL 2008
- Manuscript Received: 7 SEP 2006
Funded by
- National Science Foundation. Grant Number: SES-0452154
Abstract
Estimating bidders' risk aversion in auctions is a challenging 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 one to recover the latent distribution of private values, while first-price sealed-bid auction data allow one 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. Copyright © 2008 John Wiley & Sons, Ltd.