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Identification and Estimation of Auction Model with Two-Dimensional Unobserved Heterogeneity

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  • Elena Krasnokutskaya

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    (Department of Economics, University of Pennsylvania)

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    Abstract

    This paper investigates the empirical importance of allowing for multi-dimensional sources of unobserved heterogeneity in auction models with private information. It in turn develops the estimation procedure that recovers the distribution of private information in the presence of two distinct sources of unobserved heterogeneity. It is shown that this estimation procedure identifies components of the model and produces uniformly consistent estimators of these components. The estimation procedure is applied to the data from highway procurement. The results of the estimation indicate that allowing for two-dimensional unobserved heterogeneity may significantly affect the results of estimation as well as policy-relevant instruments derived from the estimated distributions of bidders’ costs.

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    File URL: http://economics.sas.upenn.edu/system/files/working-papers/10-036.pdf
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    Bibliographic Info

    Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 10-036.

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    Length: 44 pages
    Date of creation: 03 May 2010
    Date of revision:
    Handle: RePEc:pen:papers:10-036

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    Keywords: unobserved auction heterogeneity; procurement auctions; reserve price;

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    1. Mireia Jofre-Bonet & Martin Pesendorfer, 2003. "Estimation of a Dynamic Auction Game," Econometrica, Econometric Society, Econometric Society, vol. 71(5), pages 1443-1489, 09.
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