Bayesian estimation approaches to first-price auctions

Subal Kumbhakar, Christopher Parmeter and Mike Tsionas

Journal of Econometrics, 2012, vol. 168, issue 1, 47-59

Abstract: 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.

Keywords: Posterior distribution; Bidding strategy; Markov Chain Monte Carlo; Stochastic frontier; Gibbs sampling (search for similar items in EconPapers)
JEL-codes: C11 C13 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:168:y:2012:i:1:p:47-59

DOI: 10.1016/j.jeconom.2011.09.005

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