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Identification in Auctions With Selective Entry

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  • Matthew Gentry
  • Tong Li

Abstract

This paper considers nonparametric identification of a two‐stage entry and bidding game we call the Affiliated‐Signal (AS) model. This model assumes that potential bidders have private values, observe signals of their values prior to entry, and then choose whether to undertake a costly entry process, but imposes only minimal structure on the relationship between signals and values. It thereby nests a wide range of entry processes, including in particular the Samuelson (1985) and Levin and Smith (1994) models as special cases. Working within the AS model, we map variation in factors affecting entry behavior (potential competition or entry costs) into identified bounds on model fundamentals. These bounds are constructive, collapse to point identification when available entry variation is continuous, and can readily be refined to produce the pointwise sharp identified set. We then extend our core results to accommodate nonseparable unobserved auction‐level heterogeneity and potential endogeneity of entry shifters, thereby establishing a formal identification framework for structural analysis of auctions with selective entry.

Suggested Citation

  • Matthew Gentry & Tong Li, 2014. "Identification in Auctions With Selective Entry," Econometrica, Econometric Society, vol. 82(1), pages 315-344, January.
  • Handle: RePEc:wly:emetrp:v:82:y:2014:i:1:p:315-344
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    Cited by:

    1. Vivek Bhattacharya & James W. Roberts & Andrew Sweeting, 2014. "Regulating bidder participation in auctions," RAND Journal of Economics, RAND Corporation, vol. 45(4), pages 675-704, December.
    2. 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.
    3. Laurent Lamy & Philippe Jehiel, 2016. "On the benefits of set-asides," Post-Print hal-01688237, HAL.
    4. repec:eee:forpol:v:80:y:2017:i:c:p:107-115 is not listed on IDEAS
    5. Aryal, Gaurab & Gabrielli, Maria F., 2012. "Is Collusion Proof Auction Expensive? Estimates from Highway Procurements," MPRA Paper 57353, University Library of Munich, Germany, revised 19 Feb 2014.
    6. Gentry, Matthew & Li, Tong & Lu, Jingfeng, 2017. "Auctions with selective entry," LSE Research Online Documents on Economics 83664, London School of Economics and Political Science, LSE Library.
    7. Naoki Wakamori & Angelika Welte, 2017. "Why Do Shoppers Use Cash? Evidence from Shopping Diary Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(1), pages 115-169, February.
    8. repec:eee:econom:v:211:y:2019:i:2:p:507-538 is not listed on IDEAS
    9. Emmanuel Guerre & Yao Luo, 2019. "Nonparametric Identification of First-Price Auction with Unobserved Competition: A Density Discontinuity Framework," Papers 1908.05476, arXiv.org.
    10. Victor Aguirregabiria & Margaret Slade, 2017. "Empirical models of firms and industries," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1445-1488, December.
    11. repec:oup:emjrnl:v:22:y:2019:i:1:p:c1-c19. is not listed on IDEAS
    12. Jun Honda, 2015. "Intermediary Search for Suppliers in Procurement Auctions," Department of Economics Working Papers wuwp203, Vienna University of Economics and Business, Department of Economics.
    13. Gentry, Matthew & Stroup, Caleb, 2019. "Entry and competition in takeover auctions," Journal of Financial Economics, Elsevier, vol. 132(2), pages 298-324.
    14. Sweeting, Andrew & Bhattacharya, Vivek, 2015. "Selective entry and auction design," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 189-207.
    15. repec:eee:gamebe:v:105:y:2017:i:c:p:104-111 is not listed on IDEAS
    16. Andrew Chesher & Adam Rosen, 2015. "Identification of the distribution of valuations in an incomplete model of English auctions," CeMMAP working papers CWP30/15, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    17. Tong Li & Jingfeng Lu & Li Zhao, 2015. "Auctions with selective entry and risk averse bidders: theory and evidence," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 524-545, September.
    18. Honda, Jun, 2015. "Intermediary Search for Suppliers in Procurement Auctions," Department of Economics Working Paper Series 4628, WU Vienna University of Economics and Business.
    19. Ari Hyytinen & Sofia Lundberg & Otto Toivanen, 2015. " Design of public procurement auctions: Evidence from cleaning contracts," Working Papers Department of Managerial Economics, Strategy and Innovation (MSI) 483670, KU Leuven, Faculty of Economics and Business, Department of Managerial Economics, Strategy and Innovation (MSI).
    20. José-Antonio Espín-Sánchez & Álvaro Parra, 2018. "Entry Games under Private Information," Cowles Foundation Discussion Papers 2126, Cowles Foundation for Research in Economics, Yale University.
    21. Jääskeläinen, Jan & Tukiainen, Janne, 2019. "Anatomy of public procurement," Working Papers 118, VATT Institute for Economic Research.
    22. repec:eee:econom:v:210:y:2019:i:2:p:363-378 is not listed on IDEAS
    23. 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.
    24. repec:eee:econom:v:204:y:2018:i:2:p:189-206 is not listed on IDEAS

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