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Identification and Estimation of Auction Models with Unobserved Heterogeneity,”Review of Economic Studies
| Citations: | 23 - 2 self |
BibTeX
@MISC{Krasnokutskaya_identificationand,
author = {Elena Krasnokutskaya and Han Hong and Philip Haile and Steven Matthews and Katsumi Shimotsu},
title = {Identification and Estimation of Auction Models with Unobserved Heterogeneity,”Review of Economic Studies},
year = {}
}
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Abstract
In many procurement auctions, the bidders ’ unobserved costs depend both on a common shock and on idiosyncratic private information. Assuming a multiplicative structure, I derive sufficient conditions under which the model is identified and propose a nonparametric estimation procedure which results in uniformly consistent estimators of the cost components ’ distributions. The estimation procedure is applied to data from Michigan highway procurement auctions. Private information is estimated to account for 34 % of the variation in bidders ’ costs. It is shown that accounting for unobserved auction heterogeneity has important implications for the evaluation of the distribution of rents, efficiency, and optimal auction design.
Keyphrases
auction model unobserved heterogeneity economic study sufficient condition many procurement auction bidder cost michigan highway procurement auction private information uniformly consistent estimator multiplicative structure common shock idiosyncratic private information estimation procedure cost component distribution unobserved auction heterogeneity important implication optimal auction design bidder unobserved cost nonparametric estimation procedure
