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Correcting for Sample Selection From Competitive Bidding, with an Application to Estimating the Effect of Wages on Performance

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  • Lamy, Laurent
  • Patnam, Manasa
  • Visser, Michael

Abstract

This paper proposes a method to estimate the relationship between the price of a good sold at auction, and a post-auction outcome which is observed among auction winners. To account for both the endogeneity of the auction price and sample selection, we develop a control function approach based on the non-parametric identification of an auction model. In our application we estimate a performance equation using unique field data on wages earned by cricket players and their game-specific performances. Our empirical strategy benefits from the fact that wages are determined through randomly ordered sequential English auctions: the order in which players are sold acts as an exogenous shifter of wages. We find that the positive correlation between wages and performance comes (almost) exclusively from the selection and endogeneity effects.

Suggested Citation

  • Lamy, Laurent & Patnam, Manasa & Visser, Michael, 2016. "Correcting for Sample Selection From Competitive Bidding, with an Application to Estimating the Effect of Wages on Performance," CEPR Discussion Papers 11376, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11376
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    Cited by:

    1. Philippe Jehiel & Laurent Lamy, 2020. "On the Benefits of Set-Asides," Journal of the European Economic Association, European Economic Association, vol. 18(4), pages 1655-1696.
    2. Lamy, Laurent & Patnam, Manasa & Visser, Michael, 2023. "Distinguishing incentive from selection effects in auction-determined contracts," Journal of Econometrics, Elsevier, vol. 235(2), pages 1172-1202.
    3. Laurent Lamy & Manasa Patnam & Michael Visser, 2023. "Distinguishing incentive from selection effects in auction-determined contracts," Post-Print hal-04382099, HAL.

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    More about this item

    Keywords

    Sample selection; Structural econometrics of auctions; Wage-performance elasticity;
    All these keywords.

    JEL classification:

    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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