Endogenous Entry In First Price Auctions

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Endogenous Entry In First Price Auctions

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Author :
language : en
Publisher:
Release Date : 2003

Endogenous Entry In First Price Auctions written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.

This thesis studies the first-price auction models with endogenous entry. In the first chapter, we propose using the nearest neighbor estimation technique to estimate the entry cost in the auction models. We study the large sample properties of the proposed estimator to establish sets of conditions sufficient for its consistency and asymptotic normality. To give an example, we further apply the proposed method to estimate the cost of participation in the Michigan Highway Procurement Auctions. Our study rejects the null hypothesis of zero participation costs. Based on our estimation result, we infer how the optimal auction outcomes can be realized by using the regular policy tools. We demonstrate the improvement that the Michigan government could have made on payments if the optimal auctions had been employed. In the second chapter, we propose applying the simulated non-linear least squares (SNLLS) method of Laffont, Ossard and Vuong (1995, LOV hereafter) [28] to estimate the distribution of bidders' private values in the estimation of a first-price auction model with endogenous entry. Unlike the estimation problem of LOV, however, the valuation distribution of bidders is truncated in our problem, due to the presence of the entry cost. This further causes the absence of continuous differentiability in our statistical estimation objective function, which was required in LOV's large sample analysis. Therefore, we provide a separate analysis to study the large sample behavior of the SNLLS estimator in such setup. In the third chapter, we develop a nonparametric method that allows one to discriminate among alternative models of entry in first-price auctions. Three models of entry are considered: Levin and Smith (1994) [31], Samuelson (1985) [53], and a new model in which the information received at the entry stage is imperfectly correlated with valuations. We show that these models impose different restrictions on the quantiles of active bidders' valuations, and develop.

Endogenous Entry In First Price Private Value Auctions

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Author :
language : en
Publisher:
Release Date : 2003

Endogenous Entry In First Price Private Value Auctions written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.

A Note On Auctions With Endogenous Participation

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Author : Flávio Marques Menezes
language : en
Publisher:
Release Date : 1996

A Note On Auctions With Endogenous Participation written by Flávio Marques Menezes and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1996 with Auctions categories.

In this paper, we study an auction where bidders only know the number of potential applicants. After seeing their values for the object, bidders decide whether or not to enter the auction. Players may not want to enter the auction since they have to pay participation costs. We characterize the optimal bidding strategies for both first- and second- price sealed-bid auction when participation is endogenous. We show that only bidders with values greater than a certain cut-off point will bid in these auctions. In this context, both auctions generate the same expected revenue. We also show that, contrarily to the predictions of the fixed-n literature, the seller's expected revenue may decrease when the number of potential participants increases. In addition, we show that it is optimal for the seller to charge an entry fee, which contrasts greatly with results from the existing literature on auctions with entry.

First And Second Price Auctions Secret Reservation Price And Endogenous Entry

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Author : Feng Jiao
language : en
Publisher:
Release Date : 2010

First And Second Price Auctions Secret Reservation Price And Endogenous Entry written by Feng Jiao and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with Auctions categories.

Putting Auction Theory To Work

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Author : Paul Milgrom
language : en
Publisher: Cambridge University Press
Release Date : 2004-01-12

Putting Auction Theory To Work written by Paul Milgrom and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004-01-12 with Business & Economics categories.

This book provides a comprehensive introduction to modern auction theory and its important new applications. It is written by a leading economic theorist whose suggestions guided the creation of the new spectrum auction designs. Aimed at graduate students and professionals in economics, the book gives the most up-to-date treatments of both traditional theories of 'optimal auctions' and newer theories of multi-unit auctions and package auctions, and shows by example how these theories are used. The analysis explores the limitations of prominent older designs, such as the Vickrey auction design, and evaluates the practical responses to those limitations. It explores the tension between the traditional theory of auctions with a fixed set of bidders, in which the seller seeks to squeeze as much revenue as possible from the fixed set, and the theory of auctions with endogenous entry, in which bidder profits must be respected to encourage participation.

Entry And Competition Effects In First Price Auctions

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Author : Tong Li
language : en
Publisher:
Release Date : 2006

Entry And Competition Effects In First Price Auctions written by Tong Li and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.

Motivated by several interesting features of the highway mowing auction data from Texas Department of Transportation (TDoT), we propose a two-stage procurement auction model with endogenous entry and uncertain number of actual bidders. Our entry and bidding models pro vide several interesting implications. For the first time, we show that even within an independent private value paradigm, as the number of potential bidders increases, bidders equilibrium bidding behavior may become less aggressive because the entry effect is always positive and may dominate the negative competition effect. We also show that it is possible that the relationship between the expected winning bid and the number of potential bidders is non-monotone decreasing as well. We then develop an empirical model of entry and bidding controlling for unobserved auction heterogeneity to analyze the data. The structural estimates are used to quantify the entry effect and the competition effect with regard to the individual bids and the procurement cost, as well as the savings for the government with regard to the procurement cost when the entry cost is reduced.

Procurement Auctions With Entry And Uncertain Number Of Actual Bidders

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Author : Xiaoyong Zheng
language : en
Publisher:
Release Date : 2005

Procurement Auctions With Entry And Uncertain Number Of Actual Bidders written by Xiaoyong Zheng and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.

Endogenous Worst Case Beliefs In First Price Auctions

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Author : Vitali Gretschko
language : en
Publisher:
Release Date : 2018

Endogenous Worst Case Beliefs In First Price Auctions written by Vitali Gretschko and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.

Bidding in first-price auctions crucially depends on the beliefs of the bidders about their competitors' willingness to pay. We analyze bidding behavior in a first-price auction in which the knowledge of the bidders about the distribution of their competitors' valuations is restricted to the support and the mean. To model this situation, we assume that under such uncertainty a bidder will expect to face the distribution of valuations that minimizes her expected utility, given her bid is an optimal reaction to the bids of her competitors induced by this distribution. This introduces a novel way to endogenize beliefs in games of incomplete information. We find that for a bidder with a given valuation her worst-case belief just puts sufficient probability weight on lower valuations of her competitors to induce a high bid. At the same time the worst-case belief puts as much as possible probability weight on the same valuation in order to minimize the bidder's winning probability. This implies that even though the worst-case beliefs are type dependent in a non-monotonic way, an efficient equilibrium of the first-price auction exists.

All Pay Auctions With A Buy Price Option

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Author : Minbo Xu
language : en
Publisher:
Release Date : 2017

All Pay Auctions With A Buy Price Option written by Minbo Xu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.

This paper studies all-pay auctions for a product in which there is a buy-price option for bidders to guarantee purchases at a seller-specified price. We analyze symmetric pure-strategy equilibria in the first- and second-price all-pay auctions with the buy-price option. Under these equilibria, the buy-price option will affect bidders' bidding behavior: while it has no impact on low-value bidders, it makes middle-value bidders bid more aggressively and high-value bidders less aggressively. Under the optimal buy-price, the first- and second-price all-pay auctions maintain the same expected profit while the buy-price in the second-price is higher than those in the first-price all-pay auction. Compared to the uniform posted-price selling mechanism, all-pay auctions with the buy-price cannot attain more expected profit under the fixed number of consumers. However, if there is an endogenous entry process, they can attract more consumers and then reach more profit in expectation.

Common Values Unobserved Heterogeneity And Endogenous Entry In U S Offshore Oil Lease Auction

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Author : Giovanni Compiani
language : en
Publisher:
Release Date : 2018

Common Values Unobserved Heterogeneity And Endogenous Entry In U S Offshore Oil Lease Auction written by Giovanni Compiani and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.

An oil lease auction is the classic example motivating a common values model. However, formal testing for common values has been hindered by unobserved auction-level heterogeneity, which is likely to affect both participation in an auction and bidders' willingness to pay. We develop and apply an empirical approach for first-price sealed bid auctions with affiliated values, unobserved heterogeneity, and endogenous bidder entry. The approach also accommodates spatial dependence and sample selection. Following Haile, Hong and Shum (2003), we specify a reduced form for bidder entry outcomes and rely on an instrument for entry. However, we relax their control function requirements and demonstrate that our specification is generated by a fully specified game motivated by our application. We show that important features of the model are nonparametrically identified and propose a semiparametric estimation approach designed to scale well to the moderate sample sizes typically encountered in practice. Our empirical results show that common values, affiliated private information, and unobserved heterogeneity--three distinct phenomena with different implications for policy and empirical work--are all present and important in U.S. offshore oil and gas lease auctions. We find that ignoring unobserved heterogeneity in the empirical model obscures the presence of common values. We also examine the interaction between affiliation, the winner's curse, and the number of bidders in determining the aggressiveness of bidding and seller revenue.