Wedeveloptestsforcommonvaluesatfirst-price sealed-bid auctions. Our tests are nonparametric, require observation only of the bids submitted at each auction, and are based on the fact that the “winner’s curse ” arises only in common values auctions. The tests build on recently developed methods for using observed bids to estimate each bidder’s conditional expectation of the value of winning the auction. Equilibrium behavior implies that in a private values auction these expectations are invariant to the number of opponents each bidder faces, while with common values they are decreasing in the number of opponents. This distinction forms the basis of our tests. We consider both exogenous and endogenous variation in the number of bidders. Monte Carlo experiments show that our tests can perform well in samples of moderate sizes. We apply our tests to two different types of U.S. Forest Service timber auctions. For unit-price (“scaled”) sales often argued to fit a private values model, our tests consistently fail to find evidence of common values. For “lumpsum ” sales, where aprioriarguments for common values appear stronger, our tests yield mixed evidence against the private values hypothesis.

We present new identification results for models of first-price, second-price, ascending (English), and descending (Dutch) auctions. We analyze a general specification of the latent demand and information structure, nesting as special cases the pure private values and pure common values models, and allowing both ex ante symmetric and asymmetric bidders. We address identification of a series of nested models and derive testable restrictions that enable discrimination between models on the basis of observed data. The simplest model–that of symmetric independent private values–is nonparametrically identified even if only the transaction price from each auction is observed. For more complex models, identification and testable restrictions are obtained when additional information of one or more of the following types is available: (i) the identity of the winning bidder or other bidders, (ii) one or more bids in addition to the transaction price; (iii) exogenous variation in the number of bidders; (iv) bidder-specific covariates; (v) auction-specific covariates. While many private values (PV) models are nonparametrically

In this paper, I present new identification results and proposes an estimation method for an eBay auction model with an application. A key difficulty with data from eBay auctions is the fact that the number of potential bidders willing to pay the reserve price is not observable and the number of potential bidders varies auction by auction. While this precludes application of existing estimation methods, I show that this need not preclude structural analysis of the available bid data. In particular, I show that within the symmetric independent private values (IPV) model, observation of any two valuations of which rankings from the top is known (for example, the second- and third-highest valuations) nonparametrically identifies the bidders ' underlying value distribution. In contrast to the results of previous studies, the researcher does not need to know the number of potential bidders willing to pay the reserve price nor assume that the number of potential bidders is fixed across auctions. I then propose a consistent estimator using the semi-nonparametric maximum likelihood estimation method developed by Gallant and his coauthors. Several Monte Carlo experiments are conducted to illustrate its performance. The simulation results show that the proposed estimator performs well. I apply the proposed method to university yearbook sales on eBay. Using my estimate of bidders ' value distribution, I explore the effects of sellers ' ratings on bidders ' value distribution; compute consumers' surplus; and examine a regularity assumption that is often made in the mechanism design literature.

We present a simulation approach that provides a relatively risk-free and cost-effective environment to examine the decision space for both bid takers and bid makers in web-based dynamic price setting processes. The applicability of the simulation platform is demonstrated for Yankee auctions in particular. We focus on the optimization of bid takers’ revenue, as well as on examining the welfare implications of a range of consumer-bidding strategies—some observed, some hypothetical. While these progressive open discriminatory multiunit auctions with discrete bid increments are made feasible by Internet technologies, little is known about their structural characteristics, or their allocative efficiency. The multiunit and discrete nature of these mechanisms renders the traditional analytic framework of gametheory intractable (Nautz and Wolfstetter 1997). The simulation is based on theoretical revenue generating properties of these auctions. We use empirical data from real online auctions to instantiate the simulation’s parameters. For example, the bidding strategies of the bidders are specified based on three broad bidding strategies observed in real online auctions. The validity of the simulation model is established and subsequently the simulation model is configured to change the values of key control factors, such as the bid increment.

necessarily reflect the views of the NSF. Partial support for this research was also provided by

We present laboratory experiments of different multi-unit auction mechanisms. Two units of a homogeneous object were auctioned off among two bidders with flat demand for two units. We test whether expected demand reduction occurs in open and sealed–bid uniform–price auctions. Revenue equivalence is tested for these auctions as well as for the Ausubel, the Vickrey and the discriminatory sealed–bid auction. Furthermore, we compare the five mechanisms with respect to the efficient allocation of the units. We also provide some theoretical insights concerning the equilibria of uniform–price auctions with incomplete information.

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CeDEx Discussion Paper No. 2006–06 A complete characterization of pure strategy equilibrium in uniform price IPO auctions

In many contexts, efficiency is an important consideration in structuring auctions. In this paper, we survey several sources of inefficiency arising in auctions. We Þrst highlight how demand reducing incentives, both in theory and in practice, affect the efficiency of multi-unit auctions. Next, we study inefficiencies arising from interdependence in bidder valuations. Again, we highlight both theoretical insights as well as how these translate in practice. Finally, we present an impossibility theorem for attaining efficiency in sufficiently rich auction contexts. An auction form suggested by Klemperer is discussed as a means of ameliorating inefficiencies arising in practice.

We present laboratory experiments of different multi-unit auction mechanisms. Two units of a homogeneous object were auctioned off among two bidders with flat demand for two units. We test whether expected demand reduction occurs in open and sealed–bid uniform–price auctions. Revenue equivalence is tested for these auctions as well as for the Ausubel, the Vickrey and the discriminatory sealed–bid auction. Furthermore, we compare the five mechanisms with respect to the efficient allocation of the units.