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Bajari, Patrick L.

Works: 50 works in 291 publications in 1 language and 1,900 library holdings
Roles: Author
Classifications: HB1, 330.072
Publication Timeline
Publications about Patrick L Bajari
Publications by Patrick L Bajari
Most widely held works by Patrick L Bajari
Demand estimation with heterogeneous consumers and unobserved product characteristics : a hedonic approach by C. Lanier Benkard( Book )
21 editions published between 2001 and 2004 in English and held by 65 libraries worldwide
We study the identification and estimation of Gorman-Lancaster style hedonic models of demand for differentiated products for the case when one product characteristic is not observed. Our identification and estimation strategy is a two-step approach in the spirit of Rosen (1974). Relative to Rosen's approach, we generalize the first stage estimation to allow for a single dimensional unobserved product characteristic, and also allow the hedonic pricing function to have a general, non-additive structure. In the second stage, if the product space is continuous and the functional form of utility is known then there exists an inversion between the consumer's choices and her preference parameters. This inversion can be used to recover the distribution of random coefficients nonparametrically. For the more common case when the set of products is finite, we use the revealed preference conditions from the hedonic model to develop a Gibbs sampling estimator for the distribution of random coefficients. We apply our methods to estimating personal computer demand
House prices and consumer welfare by Patrick L Bajari( Book )
12 editions published between 2003 and 2004 in English and held by 49 libraries worldwide
Abstract: We develop a new approach to measuring changes in consumer welfare due to changes in the price of owner-occupied housing. In our approach, an agent's welfare adjustment is defined as the transfer required to keep expected discounted utility constant given a change in current home prices. We demonstrate that, up to a first-order approximation, there is no aggregate change in welfare due to price increases in the existing housing stock. This follows from a simple market clearing condition where capital gains experienced by sellers are exactly offset by welfare losses to buyers. Welfare losses can occur, however, from price increases in new construction and renovations. We show that this result holds (approximately) even in a model that accounts for changes in consumption and investment plans prompted by current price changes. We estimate the welfare cost of house price appreciation to be an average of $127 per household per year over the 1984-1998 period
Auctions versus negotiations in procurement : an empirical analysis by Patrick L Bajari( Book )
11 editions published in 2003 in English and held by 47 libraries worldwide
Should the buyer of a customized good use competitive bidding or negotiation to select a contractor? To shed light on this question, we offer a framework that compares auctions with negotiations. We then examine a comprehensive data set of private sector building contracts awarded in Northern California during the years 1995-2000. The analysis suggests a number of potential limitations to the use of auctions. Auctions perform poorly when projects are complex, contractual design is incomplete and there are few available bidders. Furthermore, auctions stifle communication between buyers and the sellers, preventing the buyer from utilizing the contractor's expertise when designing the project. Some implications of these results for procurement in the public sector are discussed
Estimating housing demand with an application to explaining racial segregation in cities by Patrick L Bajari( Book )
11 editions published in 2003 in English and held by 46 libraries worldwide
We present a three-stage estimation procedure to recover willingness to pay for housing attributes. In the first stage, we estimate a non-parametric hedonic home price function. Second, we recover each consumer's taste parameters for product characteristics using first order conditions for utility maximization. Finally, we estimate the distribution of household tastes as a function of household demographics. As an application of our methods, we compare alternative explanations for why blacks choose to live in center cities while whites suburbanize
Are structural estimates of auction models reasonable? : evidence from experimental data by Patrick L Bajari( Book )
11 editions published in 2003 in English and held by 46 libraries worldwide
Recently, economists have developed methods for structural estimation of auction models. Many researchers object to these methods because they find the rationality assumptions used in these models to be implausible. In this paper, we explore whether structural auction models can generate reasonable estimates of bidders' private information. Using bid data from auction experiments, we estimate four alternative structural models of bidding in first-price sealed-bid auctions: 1) risk neutral Bayes-Nash, 2) risk averse Bayes-Nash, 3) a model of learning and 4) a quantal response model of bidding. For each model, we compare the estimated valuations and the valuations assigned to bidders in the experiments. We find that a slight modification of Guerre, Perrigne and Vuong's (2000) procedure for estimating the risk neutral Bayes-Nash model to allow for bidder asymmetries generates quite reasonable estimates of the structural parameters
Hedonic price indexes with unobserved product characteristics, and application to PC's by C. Lanier Benkard( Book )
12 editions published in 2003 in English and held by 46 libraries worldwide
Abstract: We show that hedonic price indexes may be biased when not all product characteristics are observed. We derive two primary sources of bias. The first is a classical selection problem that arises due to changes over time in the values of unobserved characteristics. The second comes from changes in the implicit prices of unobserved characteristics. Next, we show that the bias can be corrected for under fairly general assumptions using extensions of factor analysis methods. We test our methods empirically using a new comprehensive monthly data set for desktop personal computer systems. For this data we find that the standard hedonic index has a slight upward bias of approximately 1.4% per year. We also find that omitting an important characteristic (CPU benchmark) causes a large bias in the index with standard methods, but that this bias is essentially eliminated when the proposed correction is applied
Estimating dynamic models of imperfect competition by Patrick L Bajari( Book )
11 editions published between 2004 and 2007 in English and held by 45 libraries worldwide
We describe a two-step algorithm for estimating dynamic games under the assumption that behavior is consistent with Markov Perfect Equilibrium. In the first step, the policy functions and the law of motion for the state variables are estimated. In the second step, the remaining structural parameters are estimated using the optimality conditions for equilibrium. The second step estimator is a simple simulated minimum distance estimator. The algorithm applies to a broad class of models, including I.O. models with both discrete and continuous controls such as the Ericson and Pakes (1995) model. We test the algorithm on a class of dynamic discrete choice models with normally distributed errors, and a class of dynamic oligopoly models similar to that of Pakes and McGuire (1994)
Economic insights from internet auctions : a survey by Patrick L Bajari( Book )
11 editions published in 2003 in English and held by 45 libraries worldwide
This paper surveys recent studies of Internet auctions. Four main areas of research are summarized. First, economists have documented strategic bidding in these markets and attempted to understand why sniping, or bidding at the last second, occurs. Second, some researchers have measured distortions from asymmetric information due, for instance, to the winner's curse. Third, we explore research about the role of reputation in online auctions. Finally, we discuss what Internet auctions have to teach us about auction design
An empirical model of stock analysts' recommendations : market fundamentals, conflicts of interest, and peer effects by Patrick L Bajari( Book )
11 editions published in 2004 in English and held by 44 libraries worldwide
In this paper we develop an empirical model of equity analyst recommendations for firms in the NASDAQ 100 during 1998-2003. In the model we allow recommendations to depend on publicly observed information, measures of an analyst's beliefs about a stock's future earnings, investment banking activity, and peer group effects which determine industry norms. To address the reflection problem, we propose a new approach to identification and estimation of models with peer effects suggested by recent work on estimating games. Our empirical results suggest that recommendations depend most heavily on publicly observable information about the stocks and on industry norms. In most of our specifications, the existence of an investment banking deal does not have a statistically significant relationship with analysts' stock recommendations
Complementarities and collusion in an FCC spectrum auction by Patrick L Bajari( Book )
11 editions published in 2005 in English and held by 36 libraries worldwide
"We empirically study bidding in the C Block of the US mobile phone spectrum auctions. Spectrum auctions are conducted using a simultaneous ascending auction design that allows bidders to assemble packages of licenses with geographic complementarities. While this auction design allows the market to find complementarities, the auction might also result in an inefficient equilibrium. In addition, these auctions have equilibria where implicit collusion is sustained through threats of bidding wars. We estimate a structural model in order to test for the presence of complementarities and implicit collusion. The estimation strategy is valid under a wide variety of alternative assumptions about equilibrium in these auctions and is robust to potentially important forms of unobserved heterogeneity. We make suggestions about the design of future spectrum auctions"--National Bureau of Economic Research web site
Moral hazard, adverse selection, and health expenditures : a semiparametric analysis by Patrick L Bajari( Book )
8 editions published in 2006 in English and held by 35 libraries worldwide
Theoretical models predict asymmetric information in health insurance markets may generate inefficient outcomes due to adverse selection and moral hazard. However, previous empirical research has found it difficult to disentangle adverse selection from moral hazard in health care. We empirically study this question by using data from the Health and Retirement Study to estimate a structural model of the demand for health insurance and medical care. Using a two-step semi-parametric estimation strategy we find significant evidence of moral hazard, but not of adverse selection
Bidding for incomplete contracts : an empirical analysis by Patrick L Bajari( Book )
12 editions published between 2004 and 2006 in English and held by 32 libraries worldwide
Procurement contracts are often incomplete because the initial plans and specifications are hanged and refined after the contract is awarded to the lowest bidder. This results in a final cost to the buyer that differs from the low bid, and may also involve significant adaptation and renegotiation costs. We propose a stylized model of bidding for incomplete contracts and apply it to data from highway paving contracts. Reduced form regressions suggest that bidders respond strategically to contractual incompleteness and that adaptation costs, broadly defined, are an important determinant of the observed bids. We then estimate the costs of adaptation and bidder markups using a structural auction model. The estimates suggest that adaptation costs on average account for about ten percent of the winning bid. The distortions from private information and local market power, which are the focus on much of the literature on optimal procurement mechanisms, are much smaller by comparison
Estimating static models of strategic interaction by Patrick L Bajari( Book )
9 editions published between 2004 and 2006 in English and held by 30 libraries worldwide
We propose a method for estimating static games of incomplete information. A static game is a generalization of a discrete choice model, such as a multinomial logit or probit, which allows the actions of a group of agents to be interdependent. Unlike most earlier work, the method we propose is semiparametric and does not require the covariates to lie in a discrete set. While the estimator we propose is quite flexible, we demonstrate that in most cases it can be easily implemented using standard statistical packages such as STATA. We also propose an algorithm for simulating the model which finds all equilibria to the game. As an application of our estimator, we study recommendations for high technology stocks between 1998-2003. We find that strategic motives, typically ignored in the empirical literature, appear to be an important consideration in the recommendations submitted by equity analysts
Evaluating wireless carrier consolidation using semiparametric demand estimation by Patrick L Bajari( Book )
9 editions published in 2006 in English and held by 28 libraries worldwide
The US mobile phone service industry has dramatically consolidated over the last two decades. One justification for consolidation is that merged firms can provide consumers with larger coverage areas at lower costs. We estimate the willingness to pay for national coverage to evaluate this motivation for past consolidation. As market level quantity data is not publicly available, we devise an econometric procedure that allows us to estimate the willingness to pay using market share ranks collected from a popular online retailer, Amazon. Our semiparametric maximum score estimator controls for consumers' heterogeneous preferences for carriers, handsets and minutes of calling time. We find that national coverage is strongly valued by consumers, providing an efficiency justification for across-market mergers. The methods we propose can estimate demand for other products using data from Amazon or other online retailers where quantities are not observed, but product ranks are observed. Since Amazon data can easily be gathered by researchers, these methods may be useful for the analysis of other product markets where high quality data are not publicly available
A dynamic model of housing demand : estimation and policy implications by Patrick L Bajari( Book )
11 editions published in 2010 in English and held by 24 libraries worldwide
Using data from the Panel Study of Income Dynamics (PSID) we specify, estimate and simulate a dynamic structural model of housing demand. Our model generalizes previous applied econometric work by incorporating realistic features of the housing market including non-convex adjustment costs from buying and selling a home, credit constraints from minimum downpayment requirements and uncertainty about the evolution of incomes and home prices. We argue that these features are critical for capturing salient features of housing demand observed in the PSID. After estimating the model we use it to simulate how consumer behavior responds to house price and income declines as well as tightening credit. These experiments are motivated by the U.S. recession starting in December of 2007 that saw large falls in home prices, large negative income shocks for many households and tightening credit standards. In the short run, relatively few households adjust their housing stock. Households respond instead by reducing non-housing consumption and reducing wealth because they wish to avoid losing their home and the associated adjustment costs. Households that adjust in the short run are those hit with a series of bad shocks, such as a negative income shock and a home price decline. A larger proportion of households do adjust their consumption in the long run, increasing their housing stock since housing is less expensive. However, such changes may occur several years after the shocks listed above
An empirical model of subprime mortgage default from 2000 to 2007 by Patrick L Bajari( Book )
11 editions published between 2008 and 2009 in English and held by 17 libraries worldwide
The turmoil that started with increased defaults in the subprime mortgage market has generated instability in the financial system around the world. To better understand the root causes of this financial instability, we quantify the relative importance of various drivers behind subprime borrowers' decision to default. In our econometric model, we allow borrowers to default either because doing so increases their lifetime wealth or because of short-term budget constraints, treating the decision as the outcome of a bivariate probit model with partial observability. We estimate our model using detailed loan-level data from LoanPerformance and the Case-Shiller home price index. According to our results, one main driver of default is the nationwide decrease in home prices. The decline in home prices caused many borrowers₂ outstanding mortgage liability to exceed their home value, and for these borrowers default can increase their wealth. Another important driver is deteriorating loan quality: The increase of borrowers with poor credit and high payment to income ratios elevates default rates in the subprime market. We discuss policy implications of our results. Our findings point to flaws in the securitization process that led to the current wave of defaults. Also, we use our model to evaluate alternative policies aimed at reducing the rate of default
A simple nonparametric estimator for the distribution of random coefficients by Patrick L Bajari( Book )
8 editions published in 2009 in English and held by 16 libraries worldwide
We propose a simple nonparametric mixtures estimator for recovering the joint distribution of parameter heterogeneity in economic models, such as the random coefficients logit. The estimator is based on linear regression subject to linear inequality constraints, and is robust, easy to program and computationally attractive compared to alternative estimators for random coefficient models. We prove consistency and provide the rate of convergence under deterministic and stochastic choices for the sieve approximating space. We present a Monte Carlo study and an empirical application to dynamic programming discrete choice with a serially-correlated unobserved state variable
Procurement contracting with time incentives : theory and evidence by Patrick L Bajari( Book )
9 editions published in 2009 in English and held by 15 libraries worldwide
In public sector procurement, social welfare often depends on the time taken to complete the contract. A leading example is highway construction, where slow completion times inflict a negative externality on commuters. Recently, highway departments have introduced innovative contracting methods that give contractors explicit time incentives. We characterize equilibrium bidding and efficient design of these contracts. We then gather a unique data set of highway repair projects awarded by the Minnesota Department of Transportation that includes both innovative and standard contracts. Descriptive analysis shows that for both contract types, contractors respond to the incentives as the theory predicts, both at the bidding stage and after the contract is awarded. Next we build a structural econometric model that endogenizes project completion times, and perform counterfactual policy analysis. Our estimates suggest that switching from standard contracts to designs with socially efficient time incentives would raise commuter surplus relative to the contractor₂s costs by 19% of the contract value; or in terms of the 2009 Mn/DOT budget, $290 million
A theory-based approach to hedonic price regressions with time-varying unobserved product attributes : the price of pollution by Patrick L Bajari( Book )
9 editions published in 2010 in English and held by 15 libraries worldwide
We propose a new strategy for a pervasive problem in the hedonics literature--recovering hedonic prices in the presence of time-varying correlated unobservables. Our approach relies on an assumption about homebuyer rationality, under which prior sales prices can be used to control for time-varying unobservable attributes of the house or neighborhood. Using housing transactions data from California's Bay Area between 1990 and 2006, we apply our estimator to recover marginal willingness to pay for reductions in three of the EPA's "criteria" air pollutants. Our findings suggest that ignoring bias from time-varying correlated unobservables considerably understates the benefits of a pollution reduction policy
The random coefficients logit model is identified by Patrick L Bajari( Book )
7 editions published in 2009 in English and held by 14 libraries worldwide
The random coefficients, multinomial choice logit model has been widely used in empirical choice analysis for the last 30 years. We are the first to prove that the distribution of random coefficients in this model is nonparametrically identified. Our approach exploits the structure of the logit model, and so requires no monotonicity assumptions and requires variation in product characteristics within only an infinitesimally small open set. Our identification argument is constructive and may be applied to other choice models with random coefficients
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Alternative Names
Bajari, B. 1969-
Bajari, Patrick
Bajari, Patrick 1969-
English (215)
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