Empirical Implementation of Nonparametric First-Price Auction Models

28 Pages Posted: 31 May 2011

See all articles by Daniel J. Henderson

Daniel J. Henderson

University of Alabama; Institute for the Study of Labor (IZA); Xiamen University - Wang Yanan Institute for Studies in Economics (WISE)

John A. List

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Daniel L. Millimet

Southern Methodist University (SMU) - Department of Economics; IZA Institute of Labor Economics

Christopher Parmeter

University of Miami

Michael K. Price

University of Tennessee, Knoxville

Date Written: May 2011

Abstract

Nonparametric estimators provide a flexible means of uncovering salient features of auction data. Although these estimators are popular in the literature, many key features necessary for proper implementation have yet to be uncovered. Here we provide several suggestions for nonparamteric estimation of first-price auction models. Specifically, we show how to impose monotonicity of the equilibrium bidding strategy; a key property of structural auction models not guaranteed in standard nonparametric estimation. We further develop methods for automatic bandwidth selection. Finally, we discuss how to impose monotonicity in auctions with differering number of bidders, reserve prices, and auction-specific characteristics. Finite sample performance is examined using simulated data as well as experimental auction data.

Suggested Citation

Henderson, Daniel J. and List, John A. and Millimet, Daniel L. and Parmeter, Christopher and Price, Michael K., Empirical Implementation of Nonparametric First-Price Auction Models (May 2011). NBER Working Paper No. w17095. Available at SSRN: https://ssrn.com/abstract=1854197

Daniel J. Henderson (Contact Author)

University of Alabama ( email )

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Xiamen University - Wang Yanan Institute for Studies in Economics (WISE)

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John A. List

University of Chicago - Department of Economics ( email )

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IZA Institute of Labor Economics

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Daniel L. Millimet

Southern Methodist University (SMU) - Department of Economics ( email )

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214-768-1821 (Fax)

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IZA Institute of Labor Economics

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Germany

Christopher Parmeter

University of Miami ( email )

Coral Gables, FL 33124
United States

Michael K. Price

University of Tennessee, Knoxville ( email )

The Boyd Center for Business and Economic Research
Knoxville, TN 37996
United States

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