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A Multinomial Logit Framework to Estimate Bid Shading in Procurement Auctions: Application to Cattle Sales in the Texas Panhandle

  • John Crespi

    ()

  • Richard Sexton

We develop an empirical methodology based upon multinomial probability models to estimate the magnitude of bid shading in cattle procurement in the Texas Panhandle region. The methodology works well in settings where data allow a good estimation of a bidder’s probability of winning, but the approach does not rely upon the bidding process following any particular structural framework or on the existence of a control group. Estimated markdowns of price from the competitive level are in the range of 5–10% and are somewhat larger than estimates of oligopsony markdowns from previous studies of cattle procurement in the U.S. Copyright Springer 2005

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File URL: http://hdl.handle.net/10.1007/s11151-005-1755-5
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Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 27 (2005)
Issue (Month): 3 (November)
Pages: 253-278

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Handle: RePEc:kap:revind:v:27:y:2005:i:3:p:253-278
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100336

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  1. Hunnicutt, Lynn & Bailey, DeeVon & Crook, Michelle, 2002. "Measuring Market Power With Variables Other Than Price," 2002 Annual meeting, July 28-31, Long Beach, CA 19799, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Schroeter, John R. & Azzam, Azzeddine M., 1999. "Econometric Analysis of Fed Cattle Procurement in the Texas Panhandle," Staff General Research Papers 11365, Iowa State University, Department of Economics.
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