IDEAS home Printed from https://ideas.repec.org/p/sip/dpaper/10-017.html
   My bibliography  Save this paper

Set-Asides and Subsidies in Auctions

Author

Listed:
  • Susan Athey

    () (Department of Economics, Harvard University)

  • Dominic Coey

    () (Department of Economics, Stanford University)

  • Jonathan Levin

    () (Department of Economics, Stanford University)

Abstract

Set-asides and subsidies are used extensively in government procurement and natural resource sales. We analyze these policies in an empirical model of U.S. Forest Service timber auctions. The model fits the data well both within the sample of unrestricted sales where we estimate the model, and when we predict (out of sample) bidder entry and prices for small business set-asides. Our estimates suggest that restricting entry to small businesses substantially reduces efficiency and revenue, although it does increase small business participation. An alternative policy of subsidizing small bidders would increase revenue and small bidder profit, while eliminating almost all of the efficiency loss of set-asides, and only slightly decreasing the profit of larger firms. We explain these findings by connecting to the theory of optimal auction design.

Suggested Citation

  • Susan Athey & Dominic Coey & Jonathan Levin, 2011. "Set-Asides and Subsidies in Auctions," Discussion Papers 10-017, Stanford Institute for Economic Policy Research.
  • Handle: RePEc:sip:dpaper:10-017
    as

    Download full text from publisher

    File URL: http://www-siepr.stanford.edu/repec/sip/10-017.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    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. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
    3. Susan Athey & Philip A. Haile, 2002. "Identification of Standard Auction Models," Econometrica, Econometric Society, vol. 70(6), pages 2107-2140, November.
    4. 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.
    5. Philip A. Haile, 2001. "Auctions with Resale Markets: An Application to U.S. Forest Service Timber Sales," American Economic Review, American Economic Association, vol. 91(3), pages 399-427, June.
    6. 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.
    7. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721.
    8. 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.
    9. 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.
    10. Athey, Susan, 2001. "Single Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Econometrica, Econometric Society, vol. 69(4), pages 861-889, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    set-asides; subsidies; natural resources; timber; auctions;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy

    Statistics

    Access and download statistics

    Corrections

    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:sip:dpaper:10-017. 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: (Anne Shor) The email address of this maintainer does not seem to be valid anymore. Please ask Anne Shor to update the entry or send us the correct email address. General contact details of provider: http://edirc.repec.org/data/cestaus.html .

    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.