DMCA
Nonparametric Tests for Common Values in First-Price Sealed-Bid Auctions (2003)
| Citations: | 105 - 13 self |
BibTeX
@MISC{Haile03nonparametrictests,
author = {Philip A. Haile and Han Hong and Matthew Shum},
title = {Nonparametric Tests for Common Values in First-Price Sealed-Bid Auctions},
year = {2003}
}
Share
 |
 |
 |
 |
||
OpenURL
Abstract
We develop tests for common values at first-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.
Keyphrases
common value first-price sealed-bid auction nonparametric test private value endogenous variation moderate size lumpsum sale monte carlo winner curse u.s. forest service timber auction private value hypothesis conditional expectation mixed evidence common value auction equilibrium behavior implies different type observed bid
