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The Econometrics Of English Auctions

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Author Info
Matthew Shum

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Abstract

We characterize Bayesian Nash equilibria for asymmetric ascending auctions in which both common and private value components are accommodated, and bidders' valuations and signals are drawn from asymmetric distributions. It is shown that the equilibrium inverse bid functions in each round of the auction can be solved from a system of equations formed from bidders' expectations of the value of the object conditional on all information available during that round. The computational tractability of this characterization allows us to analytically solve for the equilibrium bidding strategies in a log-normal model. This forms the basis of an econometric model which we estimate using data from the PCS spectrum auctions run by the U.S. Federal Communications Commission.

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File URL: http://repec.economics.utoronto.ca/files/UT-ECIPA-MSHUM-98-02.ps
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Publisher Info
Paper provided by University of Toronto, Department of Economics in its series Working Papers with number mshum-98-02.

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Length: 41 pages
Date of creation: 21 Sep 1998
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Handle: RePEc:tor:tecipa:mshum-98-02

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Find related papers by JEL classification:
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

References listed on IDEAS
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. Paarsch, Harry J., 1992. "Deciding between the common and private value paradigms in empirical models of auctions," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 191-215. [Downloadable!] (restricted)
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  2. Laffont, Jean-Jacques & Ossard, Hervé & Vuong, Quang, 1991. "Econometrics of First-Price Auctions," IDEI Working Papers 7, Institut d'Économie Industrielle (IDEI), Toulouse.
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  3. Milgrom, Paul & Weber, Robert J., 1982. "The value of information in a sealed-bid auction," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 105-114, June. [Downloadable!] (restricted)
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  4. Peter Cramton, 2002. "Spectrum Auctions," Papers of Peter Cramton 01hte, University of Maryland, Department of Economics - Peter Cramton, revised 16 Jul 2001. [Downloadable!]
  5. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
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  6. Bikhchandani, Sushil & Riley, John G., 1991. "Equilibria in open common value auctions," Journal of Economic Theory, Elsevier, vol. 53(1), pages 101-130, February. [Downloadable!] (restricted)
  7. Hendricks, Kenneth & Porter, Robert H, 1988. "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, American Economic Association, vol. 78(5), pages 865-83, December. [Downloadable!] (restricted)
  8. Bulow, Jeremy I & Klemperer, Paul, 1997. "The Winner's Curse and the Failure of the Law of Demand," CEPR Discussion Papers 1754, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Blackwell Publishing, vol. 67(3), pages 413-38, July.
  10. Klemperer, Paul, 1998. "Auctions with almost common values: The 'Wallet Game' and its applications," European Economic Review, Elsevier, vol. 42(3-5), pages 757-769, May. [Downloadable!] (restricted)
  11. Porter, Robert H, 1995. "The Role of Information in U.S. Offshore Oil and Gas Lease Auctions," Econometrica, Econometric Society, vol. 63(1), pages 1-27, January. [Downloadable!] (restricted)
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  12. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, 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. Matthew Shum, 1998. "Structural Estimation Of Auction Models," Working Papers mshum-98-01, University of Toronto, Department of Economics. [Downloadable!]
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