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Testing for Common Valuation in Treasury Bills Auctions

Author

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  • Jakub Kastl

    (Stanford University)

  • Ali Hortacsu

    (University of Chicago)

Abstract

We develop a test for common values in treasury bill auction. The test is based on different bidding dynamics within an auction under the two competing models. Bidders who obtain information about rivals' bids in the private values model use this information only to update their prior on the distribution of the residual supplies. In the model with common value component, they also update their prior of the valuation itself. We use this different updating effect to construct our test and we apply it to data from Canadian treasury bill market.

Suggested Citation

  • Jakub Kastl & Ali Hortacsu, 2007. "Testing for Common Valuation in Treasury Bills Auctions," 2007 Meeting Papers 222, Society for Economic Dynamics.
  • Handle: RePEc:red:sed007:222
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    File URL: https://economicdynamics.org/meetpapers/2007/paper_222.pdf
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    References listed on IDEAS

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    1. Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2000. "Optimal Nonparametric Estimation of First-Price Auctions," Econometrica, Econometric Society, vol. 68(3), pages 525-574, May.
    2. Paarsch, Harry J., 1992. "Deciding between the common and private value paradigms in empirical models of auctions," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 191-215.
    3. Philip A. Haile & Han Hong & Matthew Shum, 2003. "Nonparametric Tests for Common Values at First-Price Sealed-Bid Auctions," NBER Working Papers 10105, National Bureau of Economic Research, Inc.
    4. Philippe Février & Raphaële Preget & Michael Visser, 2002. "Econometrics of Share Auctions," Working Papers 2002-09, Center for Research in Economics and Statistics.
    5. Hendricks, Kenneth & Porter, Robert H, 1988. "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, American Economic Association, vol. 78(5), pages 865-883, December.
    6. Laffont, Jean-Jacques & Vuong, Quang, 1996. "Structural Analysis of Auction Data," American Economic Review, American Economic Association, vol. 86(2), pages 414-420, May.
    7. Erwann SbaÏ & Olivier Armantier, 2006. "Estimation and comparison of treasury auction formats when bidders are asymmetric," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(6), pages 745-779.
    8. Jakub Kastl, 2011. "Discrete Bids and Empirical Inference in Divisible Good Auctions," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 974-1014.
    9. Otis W. Gilley & Gordon V. Karels, 1981. "The Competitive Effect in Bonus Bidding: New Evidence," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 637-648, Autumn.
    10. Robert Wilson, 1979. "Auctions of Shares," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 675-689.
    11. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    12. Matt Shum & Phil Haile & Han Hong, 2003. "Nonparametric Tests for Common Values in First-Price Auctions," Economics Working Paper Archive 501, The Johns Hopkins University,Department of Economics.
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