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Comparing Open and Sealed Bid Auctions: Evidence from Timber Auctions

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Author Info
Susan Athey
Jonathan Levin
Enrique Seira

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Abstract

We study entry and bidding patterns in sealed bid and open auctions with heterogeneous bidders. Using data from U.S. Forest Service timber auctions, we document a set of systematic effects of auction format: sealed bid auctions attract more small bidders, shift the allocation towards these bidders, and can also generate higher revenue. We show that a private value auction model with endogenous participation can account for these qualitative effects of auction format. We estimate the model's parameters and show that it can explain the quantitative effects as well. Finally, we use the model to provide an assessment of bidder competitiveness, which has important consequences for auction choice.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14590.

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Date of creation: Dec 2008
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Handle: RePEc:nbr:nberwo:14590

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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  1. Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2000. "Optimal Nonparametric Estimation of First-Price Auctions," Econometrica, Econometric Society, vol. 68(3), pages 525-574, May.
  2. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
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  3. Porter, Robert H & Zona, J Douglas, 1993. "Detection of Bid Rigging in Procurement Auctions," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 518-38, June. [Downloadable!] (restricted)
    Other versions:
  4. Susan Athey & Jonathan Levin, 2001. "Information and Competition in U.S. Forest Service Timber Auctions," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 375-417, April. [Downloadable!] (restricted)
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  5. Robert H. Porter & J. Douglas Zona, 1999. "Ohio School Milk Markets: An Analysis of Bidding," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 263-288, Summer. [Downloadable!] (restricted)
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  6. Matthews, Steven, 1987. "Comparing Auctions for Risk Averse Buyers: A Buyer's Point of View," Econometrica, Econometric Society, vol. 55(3), pages 633-46, May. [Downloadable!] (restricted)
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  7. Tong Li, 2005. "Econometrics of first-price auctions with entry and binding reservation prices," Journal of Econometrics, Elsevier, vol. 126(1), pages 173-200, May. [Downloadable!] (restricted)
  8. Donald W. K. Andrews, 1997. "A Conditional Kolmogorov Test," Econometrica, Econometric Society, vol. 65(5), pages 1097-1128, September.
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  9. Philip A. Haile & Han Hong & Matthew Shum, 2004. "Nonparametric Tests for Common Values in First-Price Sealed-Bid Auctions," Working Papers 2004.149, Fondazione Eni Enrico Mattei. [Downloadable!]
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  10. Susan Athey & Philip A. Haile, 2002. "Identification of Standard Auction Models," Econometrica, Econometric Society, vol. 70(6), pages 2107-2140, November. [Downloadable!] (restricted)
  11. Philip A. Haile, 2001. "Auctions with Resale Markets: An Application to U.S. Forest Service Timber Sales," American Economic Review, American Economic Association, vol. 91(3), pages 399-427, June. [Downloadable!] (restricted)
  12. Susan Athey & Jonathan Levin & Enrique Seira, 2004. "Comparing Open and Sealed Bid Auctions: Theory and Evidence from Timber Auctions," Levine's Bibliography 122247000000000524, UCLA Department of Economics. [Downloadable!]
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  13. repec:att:wimass:1920013 is not listed on IDEAS
  14. Philip Haile, 2000. "Inference with an Incomplete Model of English Auctions," Econometric Society World Congress 2000 Contributed Papers 1546, Econometric Society. [Downloadable!]
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  15. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Hongbin Cai & J. Vernon Henderson & Qinghua Zhang, 2009. "China's Land Market Auctions: Evidence of Corruption," NBER Working Papers 15067, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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