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Complements and substitutes in sequential auctions: the case of water auctions

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  • Javier D. Donna
  • José†Antonio Espín†Sánchez

Abstract

We use data on sequential water auctions to estimate demand when units are complements or substitutes. A sequential English auction model determines the estimating structural equations. When units are complements, one bidder wins all units by paying a high price for the first unit, thus deterring others from bidding on subsequent units. When units are substitutes, different bidders win the units with positive probability, paying prices similar in magnitude. We recover individual demand consistent with this stark pattern of outcomes and confirm it is not collusive but consistent with noncooperative behavior. Demand estimates are biased if one ignores these features.

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  • Javier D. Donna & José†Antonio Espín†Sánchez, 2018. "Complements and substitutes in sequential auctions: the case of water auctions," RAND Journal of Economics, RAND Corporation, vol. 49(1), pages 87-127, March.
    • Handle: RePEc:bla:randje:v:49:y:2018:i:1:p:87-127
    DOI: 10.1111/1756-2171.12221
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    Cited by:

    1. Jaworski, Taylor, 2020. "Specification and structure in economic history," Explorations in Economic History, Elsevier, vol. 77(C).
    2. Browne, Oliver R. & Ji, Xinde James, 2023. "The Economic Value of Clarifying Property Rights: Evidence from Water in Idaho’s Snake River Basin," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).
    3. Corazzini, Luca & Galavotti, Stefano & Valbonesi, Paola, 2019. "An experimental study on sequential auctions with privately known capacities," Games and Economic Behavior, Elsevier, vol. 117(C), pages 289-315.
    4. Donna, Javier & Espin-Sanchez, Jose, 2014. "The Illiquidity of Water Markets," MPRA Paper 55078, University Library of Munich, Germany.
    5. Javier D. Donna & José‐Antonio Espín‐Sánchez, 2021. "Water theft as social insurance: south‐eastern Spain, 1851–1948," Economic History Review, Economic History Society, vol. 74(3), pages 721-753, August.

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