Increasing Competition and the Winner's Curse: Evidence from Procurement

We assess empirically the effects of the winner's curse which, in common-value auctions, counsels more conservative bidding as the number of competitors increases. First, we construct an econometric model of an auction in which bidders' preferences have both common- and private-value components, and propose a new monotone quantile approach which facilitates estimation of this model. Second, we estimate the model using bids from procurement auctions held by the State of New Jersey. For a large subset of these auctions, we find that median procurement costs rise as competition intensifies. In this setting, then, asymmetric information overturns the common economic wisdom that more competition is always desirable

Structural Econometric Methods in Auctions: A Guide to the Literature

Auction models have proved to be attractive to structural econometricians who, since the late 1980s, have made substantial progress in identifying and estimating these rich game-theoretic models of bidder behavior. We provide a guide to the literature in which we contrast the various informational structures (paradigms) commonly assumed by researchers and uncover the evolution of the eld. We highlight major contributions within each paradigm and benchmark modi cations and extensions to these core models. Lastly, we discuss special topics that have received substantial attention among auction researchers in recent years, including auctions formultiple objects, auctions with risk averse bidders, testing between common and private value paradigms, unobserved auction-speci c heterogeneity, and accounting for an unobserved number of bidders as well as endogenous entry

Comparing Open and Sealed Bid Auctions: Evidence from Timber Auctions

We study entry and bidding patterns in sealed bid and open auctions with heterogeneous bidders. Using data from U.S. Forest Service timber auctions, we document a set of systematic effects of auction format: sealed bid auctions attract more small bidders, shift the allocation towards these bidders, and can also generate higher revenue. We show that a private value auction model with endogenous participation can account for these qualitative effects of auction format. We estimate the model's parameters and show that it can explain the quantitative effects as well. Finally, we use the model to provide an assessment of bidder competitiveness, which has important consequences for auction choice.Open Auction, Sealed Bid Auction

Descending Price Optimally Coordinates Search

Investigating potential purchases is often a substantial investment under uncertainty. Standard market designs, such as simultaneous or English auctions, compound this with uncertainty about the price a bidder will have to pay in order to win. As a result they tend to confuse the process of search both by leading to wasteful information acquisition on goods that have already found a good purchaser and by discouraging needed investigations of objects, potentially eliminating all gains from trade. In contrast, we show that the Dutch auction preserves all of its properties from a standard setting without information costs because it guarantees, at the time of information acquisition, a price at which the good can be purchased. Calibrations to start-up acquisition and timber auctions suggest that in practice the social losses through poor search coordination in standard formats are an order of magnitude or two larger than the (negligible) inefficiencies arising from ex-ante bidder asymmetries.Comment: JEL Classification: D44, D47, D82, D83. 117 pages, of which 74 are appendi

The Role of Auctions in Allocating Public Resources

This paper provides an economic framework within which to consider the effectiveness and limitations of auction markets. The paper looks at the use of auctions as a policy instrument and the effects of auction design on consumer interests, the efficient allocation of resources, and industry competitiveness.Australia; Research; Ascending-bid auction; Auctions; Bidders; Conservation funds; Descending-bid auction; Dutch auction; English auction; Environmental Management; First-price sealed-bid auction; Infrastructure; Markets; Oral auction; Outcry auction; Pollutant emission permits; Power supply contracts; Public resources; Radio- spectrum; Second-price sealed-bid auction Spectrum licences; Vickrey auction; Water rights;

Essays on Environmental and Natural Resource Economics.

This dissertation addresses issues in the economics of the environment and natural resources. The first chapter pertains to the inclusion of environmental objectives into contracts between the government and private firms. In particular, it considers the possibility that conservation restrictions may undermine the goal of fostering competition among private logging firms in timber auctions. Empirically, the policy is costly but is found to be borne primarily by the state without substantial competitive distortions. Importantly, that state can reduce the impact of the policy on revenues by setting reserve prices optimally. The second chapter is joint work with Professor Erich Muehlegger. We use data on Google search activity related to climate change and shocks to local weather to demonstrate that unusual weather increases the salience of climate change as an issue. Further, we find that recent weather shocks have a significant effect on Congressional votes pertaining to environmental regulation. The third chapter makes a methodological contribution to the analysis of auction data. Many auctions have a reserve price, below which the seller simply keeps the object of interest. However, it is typically taken for granted that the object will not be re-auctioned later. Empirical researchers should account for the fact that bidders may respond to this possibility. I present a simple model of repeat auctions, discuss what information can be identified from bidding data, and provide a Monte Carlo simulation of an estimator that addresses this issue. Finally, I examine data on repeat auctions of logging contracts to see whether bidding behavior is consistent with the model. These data could provide a context in which to estimate the model and analyze counterfactual auction policies.PhDEconomicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/113433/1/eherrnst_1.pd

Performance of agglomeration bonuses in conservation auctions: Lessons from a framed field experiment

The incorporation of an agglomeration bonus payment to encourage spatial coordination in auction mechanisms to allocate Payments for Ecosystem Services (PES) contracts has been explored as a promising innovation that could enhance the effectiveness of PES schemes. Empirical evidence on the performance of this particular design feature is scant, and almost exclusively derived from laboratory experiments using student subjects. This study reports results from a framed field experimental auction allocating PES contracts with and without agglomeration bonus payments using actual forest land owners in rural China as subjects. We find tentative evidence that, in a PES auction that provides agglomeration bonuses, subjects tend to bid less in anticipation of receiving bonus payments when their neighbours are also successful in the auction. In addition, we have mixed findings as to whether the agglomeration bonus is able to induce a bidding pattern in favour of contiguous conservation. The two sets of results convey some encouraging signals of the theoretically postulated cost-effectiveness and conservation efficacy of the agglomeration bonus. Further research from the actual field is warranted in light of the policy significance of this innovative incentive mechanism.British Academy The Environment for Development Initiative

Essays in empirical industrial economics

Diese Dissertation besteht aus zwei Teilen, die durch eine Einleitung zu Auktions- und Oligopolmärkten und durch eine kurze Diskussion über die erzielten Resultate am Ende der Arbeit miteinander verbunden sind. Der erste Teil diskutiert die Literatur zu Auktionen und analysiert das Verhalten von Bietern in Österreichischen Rinderauktionen. Das Ziel der Untersuchung ist es zu bestimmen, ob es Unterschiede im Verhalten der Bieter gibt und ob diese die Möglichkeit eines späteren Kaufes in Betracht ziehen. Der zweite Teil beschäftigt sich mit den Strategien von Firmen in der Halbleiterindustrie. Im besonderen werden die strategischen Effekte von "learning-by-doing" und "spillovers" betrachtet. Des weiteren werden die Konsequenzen der Aggregation von firmenspezifischen Preisverhalten zu einer industriespezifischen Presigleichung empirisch untersucht. In beiden Teilen wird schwerpunktmäßig auf der Frage eingegangen, ob das Vernachlässigen von Asymmetrien unter den Marktteilnehmern und/oder das Vernachlässigen dynamischer Effekte die geschätzen Parameter beeinflußt.This thesis consists of two parts, which are connected by an introduction on auction and oligopoly markets and a short discussion about the obtained results at the end. The first part provides a literature review on auctions and analyzes bidders' behavior in Austrian cattle auctions. The aim is to investigate whether there are differences among bidders and whether bidders take the possibility of buying later into account when bidding for objects. The second part analyzes firms' strategies in the semiconductor industry. In particular, the strategic effects of learning-by-doing and spillovers are considered. Further, the consequences of aggregating firms' pricing behavior to an industry level pricing equation are empirically investigated. In both parts emphasis is put on the question, whether neglecting asymmetries across market participants and/or neglecting dynamic effects influences the estimated parameters

Structural Econometric Methods in Auctions: A Guide to the Literature

Auction models have proved to be attractive to structural econometricians who, since the late 1980s, have made substantial progress in identifying and estimating these rich game-theoretic models of bidder behavior. We provide a guide to the literature in which we contrast the various informational structures (paradigms) commonly assumed by researchers and uncover the evolution of the eld. We highlight major contributions within each paradigm and benchmark modi cations and extensions to these core models. Lastly, we discuss special topics that have received substantial attention among auction researchers in recent years, including auctions formultiple objects, auctions with risk averse bidders, testing between common and private value paradigms, unobserved auction-speci c heterogeneity, and accounting for an unobserved number of bidders as well as endogenous entry