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Endogenous Asymmetry and Entry in Sequential Multi-Unit Auctions: Identification and Estimation

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  • Sudip Gupta

Abstract

This paper analyzes bidding behavior in a multi period multiple unit auction. While bidders are ex ante symmetric, the first period outcome translates the second period game to a game between asymmetric bidders. The first period outcome determines who will be a strong or a weak bidder in the second period. The possibility of future asymmetry thus affects the bidding behavior in the current symmetric environment. This leads to "excessive entry" and "overbidding' in the first period. We characterize the equilibrium in terms of the observed bid distribution and entry behavior. Using this characterization we establish the nonparametric identification of bidders' privately observed signals from bid data. We suggest a three step procdure to estimate the dynamic mixed discrete-continuous choice model. We estimate our model and report the results. Specifically, we found that the federal government is only recovering 25% of the `strong' buyers' willingness to pay.In the wildcat auctions, we found that the bidders are willing to pay 10 % more to take possible future informational advantage

Suggested Citation

  • Sudip Gupta, 2004. "Endogenous Asymmetry and Entry in Sequential Multi-Unit Auctions: Identification and Estimation," Econometric Society 2004 North American Summer Meetings 566, Econometric Society.
  • Handle: RePEc:ecm:nasm04:566
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    References listed on IDEAS

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    Keywords

    Dynamic Auctions; Asymmetric Information; Endogenous Paricipation; Dynamic Discrete/ Continuous Choice;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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