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

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Author Info
Marmer, Vadim
Shneyerov, Artyom
Xu, Pai

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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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Publisher Info
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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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. 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. 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.
  4. 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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  5. Susan Athey & Philip A. Haile, 2002. "Identification of Standard Auction Models," Econometrica, Econometric Society, vol. 70(6), pages 2107-2140, November. [Downloadable!] (restricted)
  6. repec:cup:etheor:v:8:y:1992:i:2:p:241-57 is not listed on IDEAS
  7. Susan Athey & Jonathan Levin & Enrique Seira, 2004. "Comparing Open and Sealed Bid Auctions: Theory and Evidence from Timber Auctions," Levine's Bibliography 122247000000000524, UCLA Department of Economics. [Downloadable!]
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  8. 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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  9. 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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  10. Kenneth Hendricks & Joris Pinkse & Robert H. Porter, 2003. "Empirical Implications of Equilibrium Bidding in First--Price, Symmetric, Common Value Auctions," Review of Economic Studies, Blackwell Publishing, vol. 70(1), pages 115-145, January.
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  11. 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!]
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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. Yingyao Hu & David McAdams & Matthew Shum, 2009. "Nonparametric identification of auction models with non-separable unobserved heterogeneity," CeMMAP working papers CWP15/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  2. Shneyerov, Art & Wong, Adam Chi Leung, 2008. "Identification in First-Price and Dutch Auctions when the Number of Potential Bidders is Unobservable," Micro Theory Working Papers artyom_shneyerov-2008-12, Microeconomics.ca Website, revised 01 Oct 2008. [Downloadable!]
  3. Damianov, Damian, 2008. "Seller Competition by Mechanism Design," MPRA Paper 9348, University Library of Munich, Germany. [Downloadable!]
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