Urban Environmental Evaluation Using Affiliated Private Value Auction Model

This study evaluates non-marginal change of an urban environmental attribute, fire risk, by using real estate auction data in order to evaluate the governmental policy which aims to reduce urban fire risk in cities. Our evaluation is based on the extrapolation of the value distribution for auctioned real estate. Evaluation is based on the estimated value distribution for auctioned apartments. We evaluated the policy to increase the ratio of fireproofed to non-fireproofed areas in Osaka, given estimated marginal distribution function of bidders' values for auctioned apartments, taking the possibility of affiliation into account. In the estimation, we propose a simulated moments estimation which is based on the moment conditions on order statistics of bids. This allows researchers to study affiliated private value auctions even if some bids are not observable. Our estimation result rejects the hypothesis that bidders' valuation for apartments are independent when we assume that marginal distribution of value follows lognormal or exponential distributions. This study is the first one that analyzes the effects of environmental qualities such as fire risk on auctioned apartments considering the possibility of affiliation