Xun Tang () (Department of Economics, University of Pennsylvania)
Abstract
In first-price auctions with interdependent bidder values, the distributions of private signals and values cannot be uniquely recovered from bids in Bayesian Nash equilibria. Non-identification invalidates structural analyses that rely on the exact knowledge of model primitives. In this paper I introduce tight, informative bounds on the distribution of revenues in counterfactual first-price and second-price auctions with binding reserve prices. These robust bounds are identified from distributions of equilibrium bids in first-price auctions under minimal restrictions where I allow for affiliated signals and both private and common-value paradigms. The bounds can be used to compare auction formats and to select optimal reserve prices. I propose consistent nonparametric estimators of the bounds. I extend the approach to account for observed heterogeneity across auctions, as well as binding reserve prices in the data. I use a recent data of 6,721 first-price auctions of U.S. municipal bonds to estimate bounds on counterfactual revenue distributions. I then bound optimal reserve prices for sellers with various risk attitudes.
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Publisher Info
Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number
08-042.
Find related papers by JEL classification: C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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