Semi-nonparametric estimation of independently and identically repeated first-price auctions via an integrated simulated moments method

Herman J. Bierens, Hosin Song

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

In this paper we propose to estimate the value distribution of independently and identically repeated first-price auctions directly via a semi-nonparametric integrated simulated moments sieve approach. Given a candidate value distribution function in a sieve space, we simulate bids according to the equilibrium bid function involved. We take the difference of the empirical characteristic functions of the actual and simulated bids as the moment function. The objective function is then the integral of the squared moment function over an interval. Minimizing this integral to the distribution functions in the sieve space involved and letting the sieve order increase to infinity with the sample size then yields a uniformly consistent semi-nonparametric estimator of the actual value distribution. Also, we propose an integrated moment test for the validity of the first-price auction model, and an data-driven method for the choice of the sieve order. Finally, we conduct a few numerical experiments to check the performance of our approach.

Original languageEnglish
Pages (from-to)108-119
Number of pages12
JournalJournal of Econometrics
Volume168
Issue number1
DOIs
StatePublished - May 2012

Keywords

  • Empirical characteristic functions
  • First-price auctions
  • Integrated moment test
  • Legendre polynomials
  • Semi-nonparametric estimation
  • Sieve estimation
  • Simulated moments

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