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Nonparametric Identification of Auction Models with Non-Separable Unobserved Heterogeneity

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  • Yingyao Hu
  • David McAdams
  • Matthew Shum

Abstract

We propose a novel methodology for nonparametric identification of first-price auction models with independent private values, which accommodates auction-specific unobserved heterogeneity and bidder asymmetries, based on recent results from the econometric literature on nonclassical measurement error in Hu and Schennach (2008). Unlike Krasnokutskaya (2009), we do not require that equilibrium bids scale with the unobserved heterogeneity. Our approach accommodates a wide variety of applications, including settings in which there is an unobserved reserve price, an unobserved cost of bidding, or an unobserved number of bidders, as well as those in which the econometrician fails to observe some factor with a non-multiplicative effect on bidder values.

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Paper provided by The Johns Hopkins University,Department of Economics in its series Economics Working Paper Archive with number 553.

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Date of creation: Jun 2009
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Handle: RePEc:jhu:papers:553

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  1. Athey,S. & Haile,P.A., 2000. "Identification of standard auction models," Working papers 13, Wisconsin Madison - Social Systems.
  2. James W. Roberts, 2009. "Unobserved Heterogeneity and Reserve Prices in Auctions," Working Papers 10-80, Duke University, Department of Economics.
  3. Susan Athey, 2005. "Comparing Open and Sealed Bid Auctions: Theory and Evidence from Timber Auctions," Theory workshop papers 658612000000000098, UCLA Department of Economics.
  4. Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2000. "Optimal Nonparametric Estimation of First-Price Auctions," Econometrica, Econometric Society, vol. 68(3), pages 525-574, May.
  5. Yingyao Hu & Susanne M. Schennach, 2008. "Instrumental Variable Treatment of Nonclassical Measurement Error Models," Econometrica, Econometric Society, vol. 76(1), pages 195-216, 01.
  6. Lebrun, Bernard, 1999. "First Price Auctions in the Asymmetric N Bidder Case," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 125-42, February.
  7. Athey, Susan & Haile, Philip A., 2007. "Nonparametric Approaches to Auctions," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 60 Elsevier.
  8. Francesco Decarolis, 2009. "When the highest bidder loses the auction: theory and evidence from public procurement," Temi di discussione (Economic working papers) 717, Bank of Italy, Economic Research and International Relations Area.
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Cited by:
  1. Xavier d'Haultfoeuille & Philippe Fevrier, 2010. "Identification of Mixture Models Using Support Variations," Working Papers 2010-12, Centre de Recherche en Economie et Statistique.

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