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Semiparametric estimation in models of first-price, sealed-bid auctions with affiliation

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  • Hubbard, Timothy P.
  • Li, Tong
  • Paarsch, Harry J.

Abstract

Within the affiliated private-values paradigm, we develop a tractable empirical model of equilibrium behaviour at first-price, sealed-bid auctions. The model is non-parametrically identified, but the rate of convergence in estimation is slow when the number of bidders is even moderately large, so we develop a semiparametric estimation strategy, focusing on the Archimedean family of copulae and implementing this framework using particular members—the Clayton, Frank, and Gumbel copulae. We apply our framework to data from low-price, sealed-bid auctions used by the Michigan Department of Transportation to procure road-resurfacing services, rejecting the hypothesis of independence and finding significant (and high) affiliation in cost signals.

Suggested Citation

  • Hubbard, Timothy P. & Li, Tong & Paarsch, Harry J., 2012. "Semiparametric estimation in models of first-price, sealed-bid auctions with affiliation," Journal of Econometrics, Elsevier, vol. 168(1), pages 4-16.
    • Handle: RePEc:eee:econom:v:168:y:2012:i:1:p:4-16
    DOI: 10.1016/j.jeconom.2011.09.006
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    Cited by:

    1. F. Bonomo & J. Catalán & G. Durán & R. Epstein & M. Guajardo & A. Jawtuschenko & J. Marenco, 2017. "An asymmetric multi-item auction with quantity discounts applied to Internet service procurement in Buenos Aires public schools," Annals of Operations Research, Springer, vol. 258(2), pages 569-585, November.
    2. Giovanni Compiani & Philip Haile & Marcelo Sant’Anna, 2020. "Common Values, Unobserved Heterogeneity, and Endogenous Entry in US Offshore Oil Lease Auctions," Journal of Political Economy, University of Chicago Press, vol. 128(10), pages 3872-3912.
    3. Kobus, Martyna & Kurek, Radosław, 2018. "Copula-based measurement of interdependence for discrete distributions," Journal of Mathematical Economics, Elsevier, vol. 79(C), pages 27-39.
    4. 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.
    5. Tatoutchoup, Francis Didier, 2017. "Forestry auctions with interdependent values: Evidence from timber auctions," Forest Policy and Economics, Elsevier, vol. 80(C), pages 107-115.
    6. 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.
    7. Gimenes, Nathalie & Guerre, Emmanuel, 2022. "Quantile regression methods for first-price auctions," Journal of Econometrics, Elsevier, vol. 226(2), pages 224-247.
    8. Luciano I. de Castro, 2009. "Affiliation and Dependence in Economic Models," Discussion Papers 1479, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    9. Timothy P. Hubbard & Harry J. Paarsch, 2012. "On the Numerical Solution of Equilibria in Auction Models with Asymmetries within the Private-Values Paradigm," Carlo Alberto Notebooks 291, Collegio Carlo Alberto.
    10. Benjamin V. Rosa, 2019. "Resident Bid Preference, Affiliation, and Procurement Competition: Evidence from New Mexico," Journal of Industrial Economics, Wiley Blackwell, vol. 67(2), pages 161-208, June.
    11. Ma, Jun & Marmer, Vadim & Shneyerov, Artyom, 2019. "Inference for first-price auctions with Guerre, Perrigne, and Vuong’s estimator," Journal of Econometrics, Elsevier, vol. 211(2), pages 507-538.
    12. Seres, Gyula, 2017. "Auction cartels and the absence of efficient communication," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 282-306.
    13. Rosa, Benjamin V., 2020. "Affirmative action subcontracting regulations in dynamic procurement auctions," International Journal of Industrial Organization, Elsevier, vol. 72(C).
    14. Enache, Andreea & Florens, Jean-Pierre & Sbai, Erwann, 2023. "A functional estimation approach to the first-price auction models," Journal of Econometrics, Elsevier, vol. 235(2), pages 1564-1588.
    15. Fan, Yanqin & Henry, Marc, 2023. "Vector copulas," Journal of Econometrics, Elsevier, vol. 234(1), pages 128-150.
    16. Tong Li & Bingyu Zhang, 2015. "Affiliation and Entry in First-Price Auctions with Heterogeneous Bidders: An Analysis of Merger Effects," American Economic Journal: Microeconomics, American Economic Association, vol. 7(2), pages 188-214, May.
    17. Jääskeläinen, Jan & Tukiainen, Janne, 2019. "Anatomy of public procurement," Working Papers 118, VATT Institute for Economic Research.
    18. Duo Chai & Shunru Li & Pengyuan Zhang, 2024. "How Do “One-Time Bidding, Average Price Win” Land Auction Rules Affect Land Prices: A Quasinatural Experiment in Suzhou, China," Land, MDPI, vol. 13(11), pages 1-28, October.
    19. Ian Fillmore, 2021. "Price Discrimination and Public Policy in the U.S. College Market," Working Papers 2021-028, Human Capital and Economic Opportunity Working Group.

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    More about this item

    Keywords

    First-price; sealed-bid auctions; Copulae; Affiliation;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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