Inferring Heterogeneous Private Valuations from Offline Market Data via Entropic Risk-Sensitive Utility Maximization

Abstract Inferring humans' private valuations for goods from their observed market behavior is essential for evaluating market efficiency and improving trading mechanism design. A core challenge lies in uncovering the human decision function that maps private valuations and observed market states to actions. In complex market settings where humans make sequential decisions in stochastic environments, neural networks offer the flexibility to model this decision function. However, training them without access to private valuations or environment dynamics remains challenging. We tackle this challenge and study how to infer heterogeneous human valuations from offline decision data in continuous double auctions. We propose learning the decision function via risk‑sensitive utility maximization. First, we train a generative model on offline bid and ask data to simulate individual trading behavior. Using this generative model, we instantiate simulated markets composed of randomly generated buyers and sellers. Second, we introduce an agent into these simulated markets and use reinforcement learning to learn a risk-sensitive utility-maximizing decision function for the agent. Third, we formulate a bilevel optimization to jointly recover private valuations and risk preference parameters. Our extensive experiments on a large‑scale continuous double auction dataset demonstrate that our framework significantly reduces errors in inferring real human valuations.