A1204
Title: Comparing empirical methods to approximate and estimate auction models: Case of first-price IPVP
Authors: Marcus Jude San Pedro - University of Auckland (New Zealand) [presenting]
Erwann Sbai - University of Auckland (New Zealand)
Abstract: Exploring market competition and bid strategies in auctions is complex, particularly without bidder valuation data. Most empirical works assume firms follow a strategic equilibrium profit maximization model. Methods to approximate equilibrium strategies are compared, and simultaneously, structural parameters are estimated without convenient closed-form solutions. Findings show that increasing the degree of the constrained strategy improves accuracy, measured by mean squared error (MSE), but the importance of the stopping criteria is highlighted. Approximating the Bayesian Nash equilibrium (BNE) using the constrained strategic equilibrium (CSE) is comparable to mathematical programming with equilibrium constraints (MPEC) solutions. The BNE and structural parameters are successfully approximated and estimated using the MPEC approach in the symmetric and asymmetric cases.
