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What Model for Entry in First-Price Auctions? A Nonparametric Approach

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Author Info
Xu, Pai
Shneyerov, Artyom
Marmer, Vadim

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Abstract

We develop a nonparametric approach that allows one to discriminate among alternative models of entry in first-price auctions. Three models of entry are considered: Levin and Smith (1994), Samuelson (1985), and a new model in which the information received at the entry stage is imperfectly correlated with valuations. We derive testable restrictions that these three models impose on the quantiles of active bidders' valuations, and develop nonparametric tests of these restrictions. We implement the tests on a dataset of highway procurement auctions in Oklahoma. Depending on the project size, we find no support for the Samuelson model, some support for the Levin and Smith model, and somewhat more support for the new model.

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File URL: http://microeconomics.ca/vadim_marmer/selectentry21.pdf
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Paper provided by Microeconomics.ca Website in its series Micro Theory Working Papers with number marmer-07-11-22-02-26-44.

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Length: 52 pages
Date of creation: 22 Nov 2007
Date of revision: 22 Nov 2007
Handle: RePEc:ubc:pmicro:marmer-07-11-22-02-26-44

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Related research
Keywords: First-price auctions models of entry selective entry nonparametric estimation quantiles

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Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions

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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. Philip A. Haile & Han Hong & Matthew Shum, 2003. "Nonparametric Tests for Common Values in First-Price Sealed-Bid Auctions," Cowles Foundation Discussion Papers 1445, Cowles Foundation, Yale University. [Downloadable!]
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  3. De Silva, Dakshina G. & Dunne, Timothy & Kankanamge, Anuruddha & Kosmopoulou, Georgia, 2008. "The impact of public information on bidding in highway procurement auctions," European Economic Review, Elsevier, vol. 52(1), pages 150-181, January. [Downloadable!] (restricted)
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  4. Bajari, Patrick & Hortacsu, Ali, 2003. " The Winner's Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 329-55, Summer.
  5. Hong, Han & Shum, Matthew, 2002. "Increasing Competition and the Winner's Curse: Evidence from Procurement," Review of Economic Studies, Blackwell Publishing, vol. 69(4), pages 871-98, October.
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  6. Susan Athey & Philip A. Haile, 2002. "Identification of Standard Auction Models," Econometrica, Econometric Society, vol. 70(6), pages 2107-2140, November. [Downloadable!] (restricted)
  7. repec:cup:etheor:v:8:y:1992:i:2:p:241-57 is not listed on IDEAS
  8. Sokbae Lee & Oliver Linton & Yoon-Jae Whang, 2006. "Testing For Stochasticmonotonicity," STICERD - Econometrics Paper Series /2006/504, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
  9. Patrick Bajari & Lixin Ye, 2003. "Deciding Between Competition and Collusion," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 971-989, November. [Downloadable!] (restricted)
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