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A Point Decision For Partially Identified Auction Models

By Gaurab Aryal and Dong-Hyuk Kim

Abstract

This paper proposes a decision theoretic method to choose a single reserve price for partially identified auction models, such as Haile and Tamer, 2003, using data on transaction prices from English auctions. The paper employs Gilboa and Schmeidler, 1989 for inference that is robust with respect to the prior over unidentified parameters. It is optimal to interpret the transaction price as the highest value, and maximize the posterior mean of the seller’s revenue. The Monte Carlo study shows substantial gains relative to the average revenues of the Haile and Tamer interval.

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Citations

  1. (1963). A Definition of Subjective Probability,”
  2. (2011). Information Effects of Jump Bidding in English Auctions,” Working Paper.

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