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A consistent nonparametric test of affiliation in auction models

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  • Jun, Sung Jae
  • Pinkse, Joris
  • Wan, Yuanyuan

Abstract

We propose a new nonparametric test of affiliation, a strong form of positive dependence with independence as a special, knife-edge, case. The test is consistent against all departures from the null of affiliation, and its null distribution is standard normal. Like most nonparametric tests, a sample-size dependent input parameter is needed. We provide an informal procedure for choosing the input parameter and evaluate the test's performance using a simulation study. Our test can be used to test the fundamental assumptions of the auctions literature. We implement our test empirically using the Outer Continental Shelf (OCS) auction data.

Suggested Citation

  • Jun, Sung Jae & Pinkse, Joris & Wan, Yuanyuan, 2010. "A consistent nonparametric test of affiliation in auction models," Journal of Econometrics, Elsevier, vol. 159(1), pages 46-54, November.
  • Handle: RePEc:eee:econom:v:159:y:2010:i:1:p:46-54
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    References listed on IDEAS

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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. Roosen J. & Hennessy D.A., 2004. "Testing for the Monotone Likelihood Ratio Assumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 358-366, July.
    3. Kenneth Hendricks & Joris Pinkse & Robert H. Porter, 2003. "Empirical Implications of Equilibrium Bidding in First-Price, Symmetric, Common Value Auctions," Review of Economic Studies, Oxford University Press, vol. 70(1), pages 115-145.
    4. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    5. Monteiro, Paulo Klinger & Moreira, Humberto, 2006. "First-price auctions without affiliation," Economics Letters, Elsevier, vol. 91(1), pages 1-7, April.
    6. Athey, Susan & Haile, Philip A., 2007. "Nonparametric Approaches to Auctions," Handbook of Econometrics,in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 60 Elsevier.
    7. Joris Pinkse & Guofu Tan, 2005. "The Affiliation Effect in First-Price Auctions," Econometrica, Econometric Society, vol. 73(1), pages 263-277, January.
    8. Philip J. Reny & Shmuel Zamir, 2004. "On the Existence of Pure Strategy Monotone Equilibria in Asymmetric First-Price Auctions," Econometrica, Econometric Society, vol. 72(4), pages 1105-1125, July.
    9. Tong Li, 2005. "Econometrics of first-price auctions with entry and binding reservation prices," Journal of Econometrics, Elsevier, vol. 126(1), pages 173-200, May.
    10. Karlin, Samuel & Rinott, Yosef, 1980. "Classes of orderings of measures and related correlation inequalities. I. Multivariate totally positive distributions," Journal of Multivariate Analysis, Elsevier, vol. 10(4), pages 467-498, December.
    11. 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 865-883, December.
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    Cited by:

    1. Fang, Hanming & Tang, Xun, 2014. "Inference of bidders’ risk attitudes in ascending auctions with endogenous entry," Journal of Econometrics, Elsevier, vol. 180(2), pages 198-216.
    2. Kotlyarova, Yulia & Schafgans, Marcia M. A. & Zinde‐Walsh, Victoria, 2011. "Adapting kernel estimation to uncertain smoothness," LSE Research Online Documents on Economics 42015, London School of Economics and Political Science, LSE Library.
    3. Luciano De Castro, 2010. "Affiliation, Equilibrium Existence and Revenue Ranking of Auctions," Discussion Papers 1530, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    4. Hickman Brent R. & Hubbard Timothy P. & Sağlam Yiğit, 2012. "Structural Econometric Methods in Auctions: A Guide to the Literature," Journal of Econometric Methods, De Gruyter, vol. 1(1), pages 67-106, August.
    5. Aradillas-López, Andrés & Gandhi, Amit & Quint, Daniel, 2016. "A simple test for moment inequality models with an application to English auctions," Journal of Econometrics, Elsevier, vol. 194(1), pages 96-115.
    6. Nianqing Liu & Yao Luo, 2014. "A Nonparametric Test of Exogenous Participation in First-Price Auctions," Working Papers tecipa-519, University of Toronto, Department of Economics.
    7. Ma, Jun & Marmer, Vadim & Shneyerov, Artyom, 2016. "Inference for First-Price Auctions with Guerre, Perrigne, and Vuong's estimator," Microeconomics.ca working papers vadim_marmer-2016-4, Vancouver School of Economics, revised 04 Mar 2016.

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