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Asymmetry in first-price auctions with affiliated private values

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  • Quang Vuong

    (University of Southern California, Department of Economics, Los Angeles, CA 90089-0253, USA)

  • Sandra Campo

    (University of North Carolina, Department of Economics, Chapel Hill, NC 27599-3305, USA)

  • Isabelle Perrigne

    (University of Southern California, Department of Economics, Los Angeles, CA 90089-0253, USA)

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    Abstract

    Collusion and heterogeneity across firms may introduce asymmetry in bidding games. A major difficulty in asymmetric auctions is that the Bayesian Nash equilibrium strategies are solutions of an intractable system of differential equations. We propose a simple method for estimating asymmetric first-price auctions with affiliated private values. Considering two types of bidders, we show that these differential equations can be rewritten using the observed bid distribution. We establish the identification of the model, characterize its theoretical restrictions, and propose a two-step non-parametric estimation procedure for estimating the private value distributions. An empirical analysis of joint bidding in OCS auctions is provided. Copyright © 2003 John Wiley & Sons, Ltd.

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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

    Volume (Year): 18 (2003)
    Issue (Month): 2 ()
    Pages: 179-207

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    Handle: RePEc:jae:japmet:v:18:y:2003:i:2:p:179-207

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    Citations

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    Cited by:
    1. De Silva, Dakshina G. & Kosmopoulou, Georgia & Lamarche, Carlos, 2007. "The Effect of Information on the Bidding and Survival of Entrants in Procurement Auctions," MPRA Paper 5236, University Library of Munich, Germany.
    2. Hill, Jonathan B. & Shneyerov, Artyom, 2013. "Are there common values in first-price auctions? A tail-index nonparametric test," Journal of Econometrics, Elsevier, vol. 174(2), pages 144-164.
    3. Laurent Lamy, 2008. "The econometrics of auctions with asymmetric anonymous bidders," PSE Working Papers halshs-00586039, HAL.
    4. Sudip Gupta, 2004. "Endogenous Asymmetry and Entry in Sequential Multi-Unit Auctions: Identification and Estimation," Econometric Society 2004 North American Summer Meetings 566, Econometric Society.
    5. Nakabayashi, Jun, 2013. "Small business set-asides in procurement auctions: An empirical analysis," Journal of Public Economics, Elsevier, vol. 100(C), pages 28-44.
    6. Alan Mehlenbacher, 2007. "Multiagent System Platform for Auction Simulations," Department Discussion Papers 0706, Department of Economics, University of Victoria.
    7. Estelle Cantillon & Martin Pesendorfer, . "Combination Bidding in Multi-unit Auctions," ULB Institutional Repository 2013/151705, ULB -- Universite Libre de Bruxelles.
    8. Lu, Jingfeng & Perrigne, Isabelle, 2006. "Estimating risk aversion from ascending and sealed-bid auctions: the case of timber auction data," MPRA Paper 948, University Library of Munich, Germany.
    9. Kalyn T. Coatney & Sherrill L. Shaffer & Dale J. Menkhaus, 2011. "Auction Prices, Market Share, and a Common Agent," CAMA Working Papers 2011-24, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    10. Campo, Sandra, 2012. "Risk aversion and asymmetry in procurement auctions: Identification, estimation and application to construction procurements," Journal of Econometrics, Elsevier, vol. 168(1), pages 96-107.
    11. Bernard Lebrun, 2008. "First-Price, Second-Price, and English Auctions with Resale," Working Papers 2008_06, York University, Department of Economics.
    12. De Silva, Dakshina G. & Dunne, Timothy & Kosmopoulou, Georgia & Lamarche, Carlos, 2012. "Disadvantaged business enterprise goals in government procurement contracting: An analysis of bidding behavior and costs," International Journal of Industrial Organization, Elsevier, vol. 30(4), pages 377-388.
    13. Zhang, Bin & Guler, Kemal, 2005. "Nonparametric estimation of asymmetric first price auctions: A simplified approach," Economics Letters, Elsevier, vol. 88(3), pages 318-322, September.
    14. Tukiainen, Janne, 2008. "Testing for common costs in the City of Helsinki bus transit auctions," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1308-1322, November.
    15. Estelle Cantillon & Martin Pesendorfer, 2013. "Combination bidding in multi-unit auctions," LSE Research Online Documents on Economics 54289, London School of Economics and Political Science, LSE Library.

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