Testing for risk aversion in first-price sealed-bid auctions
2022
Jun, Sung Jae | Zincenko, Federico
We consider testing for risk aversion in first-price sealed-bid auctions with symmetric bidders and independent private values. We impose several restrictions on the parameter space, which are all implied by Guerre et al. (2009)’s exclusion restriction, and we articulate what restrictions are needed for our test to control the limiting size and to be pointwise consistent. Critical values can be obtained from the standard normal distribution. We also analyze local-power properties and show that our test detects local alternative at the parametric rate.
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