Endogenous Entry In First Price Private Value Auctions
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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.
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.
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.
Inference Of Bidders Risk Attitudes In Ascending Auctions With Endogenous Entry
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Author : Hanming Fang
language : en
Publisher:
Release Date : 2013
Inference Of Bidders Risk Attitudes In Ascending Auctions With Endogenous Entry written by Hanming Fang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with Economics categories.
Bidders' risk attitudes have key implications for choices of revenue-maximizing auction formats. In ascending auctions, bid distributions do not provide information about risk preference. We infer risk attitudes using distributions of transaction prices and participation decisions in ascending auctions with entry costs. Nonparametric tests are proposed for two distinct scenarios: first, the expected entry cost can be consistently estimated from data; second, the data does not report entry costs but contains exogenous variations of potential competition and auction characteristics. In the first scenario, we exploit the fact that the risk premium required for entry - the difference between ex ante expected profits from entry and the certainty equivalent - is strictly positive if and only if bidders are risk averse. Our test is based on identification of bidders' ex ante profits. In the second scenario, our test builds on the fact that risk attitudes affect how equilibrium entry probabilities vary with observed auction characteristics and potential competition. We also show identification of risk attitudes in a more general model of ascending auctions with selective entry, where bidders receive entry-stage signals that are correlated with private values.
Inference Of Bidders S Risk Attitudes In Ascending Auctions With Endogenous Entry
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Author : Hanming Fang
language : en
Publisher:
Release Date : 2013
Inference Of Bidders S Risk Attitudes In Ascending Auctions With Endogenous Entry written by Hanming Fang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Common Values Unobserved Heterogeneity And Endogenous Entry In U S Offshore Oil Lease Auctions
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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 Auctions 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.
In a "common values" environment, some market participants have private information relevant to others' assessments of their own valuations or costs. Economic theory shows that this type of informational asymmetry can have important implications for market performance and market design. Yet even for the classic example of an oil lease auction, formal evidence on the presence and strength of common values has been limited by the problem of auction-level unobserved heterogeneity that is likely to affect both participation in an auction and bidders' willingness to pay. Here we develop an empirical approach for first-price sealed bid auctions with affiliated values, unobserved heterogeneity, and endogenous bidder entry. We show that important features of the model are nonparametrically identified and apply a semiparametric estimation approach to data from U.S. offshore oil and gas lease auctions. 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. Failing to account for unobserved heterogeneity obscures the empirical evidence of common values. We examine the implications of our estimates for the classic revenue ranking of sealed bid auction designs, and for the interaction between affiliation, the winner's curse, and the number of bidders in determining the aggressiveness of bidding and seller revenue.
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.
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.
Essays On Empirical Auctions And Related Econometrics
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Author :
language : en
Publisher:
Release Date : 2014
Essays On Empirical Auctions And Related Econometrics written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
The first chapter studies identification and estimation of first-price auctions if the bidders face ambiguity about the distribution of valuations. Ambiguity is modeled using Gilboa and Schmeidler's (1989) Maxmin Expected Utility preferences. We exploit variation in the number of bidders to identify the essential primitives of the model. The identification result yields a closed form for the inverse bid function, which suggests a two-step estimation procedure. We study asymptotic and finite sample properties of the estimators. We find evidence of ambiguity in USFS timber auctions which leads to aggressive bidding for bidders with high valuations and has important implications for auction design. The second chapter proposes a procedure to test restrictions on infinite-dimensional parameters (partially) identified by unconditional or conditional moment equalities. Our new method allows us to test restrictions involving a continuum of inequalities. Examples of such restrictions include weakly increasing, concavity and first-order stochastic dominance. We show that our testing procedure controls size uniformly and has power approaching 1 against fixed alternatives. We conduct Monte Carlo Experiments to study the finite sample properties of our procedure. The third chapter studies the inference problem of bidders' risk attitudes in Independent Private Value (IPV) first-price auctions with multiplicative auction-level unobserved heterogeneity. Bidders are assumed to have Constant Relative Risk Aversion. Under the exclusion restriction that bidders randomly select themselves into auctions given the auction-level unobserved heterogeneity, bidders' CRRA coefficient is point-identified from bid data of auctions with at least two different number of active bidders. Our exclusion restriction is consistent with a variety of models with endogenous entry. Empirical application to USFS timber auctions shows that we will conclude that timber firms are risk averse if we ignoring the unobserved heterogeneity. But once we take the unobserved heterogeneity into account, risk neutrality is consistent with the data.
Entry In First Price Auctions With Signaling
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Author : Olivier Bos
language : en
Publisher:
Release Date : 2016
Entry In First Price Auctions With Signaling written by Olivier Bos and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
We study the optimal entry fee in a symmetric private value first-price auction with signaling, in which the participation decisions and the auction outcome are used by an outside observer to infer the bidders' types. We show that this auction has a unique fully separating equilibrium bidding function. The expected revenue maximizing entry fee is the maximal fee that guarantees full participation.