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A consistent econometric test for bid interdependence in repeated second-price auctions with posted prices

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  • Drichoutis, Andreas
  • Nayga, Rodolfo
  • Lazaridis, Panagiotis
  • Park, Beom Su

Abstract

In repeated second-price experimental auctions, the winning bid is normally posted after each round. The posting of these winning prices after each round can result in bids submitted in later rounds to be interdependent with posted prices from earlier rounds. Several approaches in the past have tried to scrutinize their experimental data for value interdependence by regressing bids on lagged market prices or lagged bids and ignoring the inherent endogeneity problem. This paper introduces a formal test for bid interdependence in repeated second-price auctions with posted prices using a dynamic panel model. We then apply this test to formally check the presence of bid interdependence in three datasets used in previous studies.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22564.

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Date of creation: May 2010
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Handle: RePEc:pra:mprapa:22564

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Keywords: experimental auctions; bid interdependence; dynamic panel estimator; second-price auction;

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