Inference of bidders' risk attitudes in ascending auctions with endogenous entry

Bidders' risk attitudes have key implications for the choices of revenue-maximizing auction formats. In ascending auctions, bid distributions do not provide information about risk preference. We infer risk attitudes using distributions of transaction prices and participation decisions in ascending auctions with entry costs. Nonparametric tests are proposed for two distinct scenarios: first, the expected entry cost can be consistently estimated from the data; second, the data does not report entry costs but contains exogenous variation in potential competition and auction characteristics. We also show the identification of risk attitudes in ascending auctions with selective entry, where bidders receive entry-stage signals correlated with their values. (C) 2014 Elsevier B.V. All rights reserved.