IDEAS home Printed from
   My bibliography  Save this paper

Multi-Attribute Auctions with Unobserved Heterogeneity in Supplier Qualities and Buyers Tastes


  • Elena Krasnokutskaya

    (Johns Hopkins University)


Multi-attribute auctions are widely used in industry procurement. Recently many Internet-based auction markets adopted multi-attribute structure. Multi-attribute auctions differ from standard low price auctions in that (a) a buyer chooses a winner on the basis of several indicators instead of taking only a price quote into account; (b) the exact weighting scheme that is used to determine the winner is not announced. Often the exact set of characteristics included in the score is left unspecified. These features create natural obstacles to the analysis of multi-attribute auctions since they imply that auctioneers' tastes as well as some of the relevant bidder characteristics may not be observed in the data. The structure of the market is such that exactly the same set of suppliers is considered by a negligibly small set of buyers. Therefore, in contrast to the markets with differentiated products we cannot assume that the probability of winning given the choice set is observed in the data. This paper shows that the multi-attribute auction model with unobserved bidder characteristic and unobserved auctioneer tastes is identified from the data. An important identification step deals with recovering bidders' quality rankings. This step essentially proposes an algorithm to recover bidder classification into unobserved groups. Once quality classification is constructed unobserved bidders tastes are recovered by exploiting the variation in a bidder probability of winning in response to price variation. We show that are model is capable of generating price variation required for identification. We apply our methodology to the data for on-line multi-attribute procurement auctions for services and estimate the distribution of buyers' tastes, sellers' unobserved characteristics and the distribution of sellers' private costs.

Suggested Citation

  • Elena Krasnokutskaya, 2012. "Multi-Attribute Auctions with Unobserved Heterogeneity in Supplier Qualities and Buyers Tastes," 2012 Meeting Papers 283, Society for Economic Dynamics.
  • Handle: RePEc:red:sed012:283

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Steven Berry & James Levinsohn & Ariel Pakes, 2004. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 68-105, February.
    2. Hubbard, Timothy P. & Paarsch, Harry J., 2009. "Investigating bid preferences at low-price, sealed-bid auctions with endogenous participation," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 1-14, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed012:283. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.