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Testing For Affiliation In First-Price Auctions Using Entry Behavior

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  • Tong Li
  • Bingyu Zhang
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    Abstract

    In this article, we show that affiliation among potential bidders' private information (either private signals or entry costs) leads to affiliation among their entry decisions. We propose a test for affiliation among potential bidders' private information based on the implication of affiliation on the entry behavior, which is general and widely applicable to various scenarios. The test is implemented using the simulation based method. We then apply our method to timber sales in the Oregon Department of Forestry and find a small but strongly significant level of affiliation among all timber companies. Copyright (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2354.2010.00603.x
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    Bibliographic Info

    Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

    Volume (Year): 51 (2010)
    Issue (Month): 3 (08)
    Pages: 837-850

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    Handle: RePEc:ier:iecrev:v:51:y:2010:i:3:p:837-850

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    Cited by:
    1. Li, Tong & Zheng, Xiaoyong, 2012. "Information acquisition and/or bid preparation: A structural analysis of entry and bidding in timber sale auctions," Journal of Econometrics, Elsevier, vol. 168(1), pages 29-46.
    2. Fang, Hanming & Tang, Xun, 2014. "Inference of bidders’ risk attitudes in ascending auctions with endogenous entry," Journal of Econometrics, Elsevier, vol. 180(2), pages 198-216.
    3. Luciano De Castro, 2010. "Affiliation, Equilibrium Existence and Revenue Ranking of Auctions," Discussion Papers 1530, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

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