Nonparametric Estimation of Large Auctions with Risk Averse Bidders

This article studies the robustness of Guerre et al.'s (2000) two-step nonparametric estimation procedure in a first-price, sealed-bid auction with n (n >> 1) risk averse bidders. Based on an asymptotic approximation with precision of order O(n(-2)) of the intractable equilibrium bidding function, we establish the uniform consistency with rates of convergence of Guerre et al.'s (2000) two-step nonparametric estimator in the presence of risk aversion. Monte Carlo experiments show that the two-step nonparametric estimator performs reasonably well with a moderate number of bidders such as six.