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Comparing Open and Sealed Bid Auctions: Evidence from Timber Auctions

  • Susan Athey
  • Jonathan Levin
  • Enrique Seira

We study entry and bidding patterns in sealed bid and open auctions with heterogeneous bidders. Using data from U.S. Forest Service timber auctions, we document a set of systematic effects of auction format: sealed bid auctions attract more small bidders, shift the allocation towards these bidders, and can also generate higher revenue. We show that a private value auction model with endogenous participation can account for these qualitative effects of auction format. We estimate the model's parameters and show that it can explain the quantitative effects as well. Finally, we use the model to provide an assessment of bidder competitiveness, which has important consequences for auction choice.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14590.

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Date of creation: Dec 2008
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Publication status: published as Susan Athey & Jonathan Levin & Enrique Seira, 2011. "Comparing open and Sealed Bid Auctions: Evidence from Timber Auctions," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 207-257.
Handle: RePEc:nbr:nberwo:14590
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  1. Matthews, Steven, 1987. "Comparing Auctions for Risk Averse Buyers: A Buyer's Point of View," Econometrica, Econometric Society, vol. 55(3), pages 633-46, May.
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  3. Jonathan Levin & Susan Athey & Enrique Seira, 2004. "Comparing Open and Sealed Bid Auctions: Theory and Evidence from Timber Auctions," Working Papers 2004.142, Fondazione Eni Enrico Mattei.
  4. Levin, Jonathan & Athey, Susan, 2001. "Information and Competition in U.S. Forest Service Timber Auctions," Scholarly Articles 3612768, Harvard University Department of Economics.
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  12. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice," Introductory Chapters, in: Auctions: Theory and Practice Princeton University Press.
  13. Haile,P.A. & Tamer,E.T., 2000. "Inference with an incomplete model of English auctions," Working papers 18, Wisconsin Madison - Social Systems.
  14. Susan Athey & Jonathan Levin & Enrique Seira, 2011. "Comparing open and Sealed Bid Auctions: Evidence from Timber Auctions," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 207-257.
  15. Donald W. K. Andrews, 1997. "A Conditional Kolmogorov Test," Econometrica, Econometric Society, vol. 65(5), pages 1097-1128, September.
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  18. Philip A. Haile & Han Hong & Matthew Shum, 2003. "Nonparametric Tests for Common Values in First-Price Sealed-Bid Auctions," Cowles Foundation Discussion Papers 1445, Cowles Foundation for Research in Economics, Yale University.
  19. Marshall, R.C. & Richard J.F., 1995. "Bider Collusion at Forest Service Timber Sales," Papers 7-95-3, Pennsylvania State - Department of Economics.
  20. Paul Klemperer, 2004. "What Really Matters in Auction Design, from Auctions: Theory and Practice," Introductory Chapters, in: Auctions: Theory and Practice Princeton University Press.
  21. Tong Li & Xiaoyong Zheng, 2006. "Entry and competition effects in first-price auctions: theory and evidence from procurement auctions," CeMMAP working papers CWP13/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  22. Patrick Bajari & Ali Hortacsu, 2000. "Winner's Curse, Reserve Prices and Endogenous Entry: Empirical Insights from eBay Auctions," Econometric Society World Congress 2000 Contributed Papers 1927, Econometric Society.
  23. Tong Li, 2005. "Econometrics of first-price auctions with entry and binding reservation prices," Journal of Econometrics, Elsevier, vol. 126(1), pages 173-200, May.
  24. Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2000. "Optimal Nonparametric Estimation of First-Price Auctions," Econometrica, Econometric Society, vol. 68(3), pages 525-574, May.
  25. Martin Pesendorfer, 2000. "A Study of Collusion in First-Price Auctions," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 381-411.
  26. Lance Brannman & Luke M. Froeb, 2000. "Mergers, Cartels, Set-Asides, and Bidding Preferences in Asymmetric Oral Auctions," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 283-290, May.
  27. Harry J. Paarsch & Bjarne Brendstrup, 2004. "Nonparametric Estimation of Dutch and First-Price, Sealed-Bid Auction Models with Asymmetric Bidders," Econometric Society 2004 North American Summer Meetings 39, Econometric Society.
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