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Bidding frictions in ascending auctions

Author

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  • Barkley, Aaron
  • Groeger, Joachim R.
  • Miller, Robert A.

Abstract

This paper develops an approach for identifying and estimating the distribution of valuations in ascending auctions where an indeterminate number of bidders have an unknown number of bidding opportunities. To finesse the complications for identification and estimation due to multiple equilibria, our empirical analysis is based on the fact that bidders play undominated strategies in every equilibrium. We apply the model to a monthly financial market in which local banks compete for deposit securities. This market features frequent jump bidding and winning bids well above the highest losing bid, suggesting standard empirical approaches for ascending auctions may not be suitable. We find that frictions are costly both for revenue and allocative efficiency.

Suggested Citation

  • Barkley, Aaron & Groeger, Joachim R. & Miller, Robert A., 2021. "Bidding frictions in ascending auctions," Journal of Econometrics, Elsevier, vol. 223(2), pages 376-400.
    • Handle: RePEc:eee:econom:v:223:y:2021:i:2:p:376-400
    DOI: 10.1016/j.jeconom.2019.11.009
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    References listed on IDEAS

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    More about this item

    Keywords

    Dynamic games; Auctions; Jump bids; Dominance; Inference;
    All these keywords.

    JEL classification:

    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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