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Inference with an incomplete model of English auctions

  • Haile,P.A.
  • Tamer,E.T.

    (University of Wisconsin-Madison, Social Systems Research Institute)

Standard models of English auctions abstract from actual practice by assuming that bidders continuously affirm their willingness to pay as the price rises exogenously. This creates a significant mismatch between the bids envisioned in theory and those observed in practice, limiting the usefulness of the theory as a basis for a structural econometric model. We show that one often can obtain tight bounds on the structural objects of interest without resorting to dubious identifying assumptions based on existing models. Very weak assumptions provide sufficient structure to enable nonparameteric identification of bounds on the distribution of bidder valuations and the optimal reserve price. When auctions differ in observable characteristics, bounds on parameters of a semiparametric model can also be identified. We apply our estimation approach to data from U.S. Forest Service timber auctions.

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Paper provided by Wisconsin Madison - Social Systems in its series Working papers with number 18.

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Date of creation: 2000
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Handle: RePEc:att:wimass:200018
Contact details of provider: Postal: UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.

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  1. Horowitz, J.L. & Manski, C.F., 1995. "Censoring of Outcomes and Regressors Due to Survey Nonresponse: Identification and estimation Using Weights and Imputations," Working Papers 95-12, University of Iowa, Department of Economics.
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  6. R. Preston McAfee & Daniel Vincent, 1992. "Updating the Reserve Price in Common Value Auctions," Discussion Papers 977, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. John G. Riley & William Samuelson, 1979. "Optimal Auctions," UCLA Economics Working Papers 152, UCLA Department of Economics.
  8. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-90, October.
  9. Zvika Neeman, 1998. "The Effectiveness of Simple Auctions," Papers 0095, Boston University - Industry Studies Programme.
  10. McAfee, R Preston & Quan, Daniel C & Vincent, Daniel R, 2002. "How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 391-416, December.
  11. Jovanovic, Boyan, 1988. "Observable Implications Of Models With Multiple Equilibria," Working Papers 88-20, C.V. Starr Center for Applied Economics, New York University.
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  24. Donald, S.G. & Paarsch, H.J., 1993. "Identification, Estimation, and Testing in Empirical Models of Auction Within the Independent Private Values Paradigm," UWO Department of Economics Working Papers 9319, University of Western Ontario, Department of Economics.
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