Empirical Models of Auctions

Many important economic questions arising in auctions can be answered only with knowledge of the underlying primitive distributions governing bidder demand and information. An active literature has developed aiming to estimate these primitives by exploiting restrictions from economic theory as part of the econometric model used to interpret auction data. We review some highlights of this recent literature, focusing on identification and empirical applications. We describe three insights that underlie much of the recent methodological progress in this area and discuss some of the ways these insights have been extended to richer models allowing more convincing empirical applications. We discuss several recent empirical studies using these methods to address a range of important economic questions.Auctions, Identification, Estimation, Testing

Empirical Models of Auctions

Many important economic questions arising in auctions can be answered only with knowledge of the underlying primitive distributions governing bidder demand and information. An active literature has developed aiming to estimate these primitives by exploiting restrictions from economic theory as part of the econometric model used to interpret auction data. We review some highlights of this recent literature, focusing on identification and empirical applications. We describe three insights that underlie much of the recent methodological progress in this area and discuss some of the ways these insights have been extended to richer models allowing more convincing empirical applications. We discuss several recent empirical studies using these methods to address a range of important economic questions.

Nonparametric Identification of Multinomial Choice Demand Models with Heterogeneous Consumers

We consider identification of nonparametric random utility models of multinomial choice using "micro data," i.e., observation of the characteristics and choices of individual consumers. Our model of preferences nests random coefficients discrete choice models widely used in practice with parametric functional form and distributional assumptions. However, the model is nonparametric and distribution free. It allows choice-specific unobservables, endogenous choice characteristics, unknown heteroskedasticity, and high-dimensional correlated taste shocks. Under standard "large support" and instrumental variables assumptions, we show identifiability of the random utility model. We demonstrate robustness of these results to relaxation of the large support condition and show that when it is replaced with a weaker "common choice probability" condition, the demand structure is still identified. We show that key maintained hypotheses are testable.Nonparametric identification, Discrete choice demand, Differentiated products

Identification in a Class of Nonparametric Simultaneous Equations Models

We consider identification in a class of nonseparable nonparametric simultaneous equations models introduced by Matzkin (2008). These models combine standard exclusion restrictions with a requirement that each structural error enter through a "residual index" function. We provide constructive proofs of identification under several sets of conditions, demonstrating tradeoffs between restrictions on the support of the instruments, restrictions on the joint distribution of the structural errors, and restrictions on the form of the residual index function.Simultaneous equations, Nonseparable models, Nonparametric identification

Identification of a Heterogeneous Generalized Regression Model with Group Effects

We consider identification in a "generalized regression model" (Han, 1987) for panel settings in which each observation can be associated with a "group" whose members are subject to a common unobserved shock. Common examples of groups include markets, schools or cities. The model is fully nonparametric and allows for the endogeneity of group-specific observables, which might include prices, policies, and/or treatments. The model features heterogeneous responses to observables and unobservables, and arbitrary heteroskedasticity. We provide sufficient conditions for full identification of the model, as well as weaker conditions sufficient for identification of the latent group effects and the distribution of outcomes conditional on covariates and the group effect.Nonparametric identification, Binary choice, Threshold crossing, Censored regression, Proportional hazard model

Self-Serving Dictators and Economic Growth

A new line of theoretical and empirical literature emphasizes the pivotal role of fair institutions for growth.We present a model, a laboratory experiment, and a simple cross-country regression supporting this view.We model an economy with an unequal distribution of property rights, in which individuals can free-ride or cooperate.Experimentally we observe a dramatic drop in cooperation (and growth), when inequality is increased by a selfserving dictator.No such effect is observed when the inequality is increased by a fair procedure.Our regression analysis provides basic macroeconomic support for the adverse growth effect of the interaction between the degree and the genesis of inequality.We conclude that economies giving equal opportunities to all are not likely to suffer retarded growth due to inequality in the way economies with self-serving dictators will.economic growth;inequality;corruption;public goods

Geometrically asymmetric electrodes for probing electrochemical reaction kinetics: a case study of hydrogen at the Pt–CsH_2PO_4 interface

Electrochemical reactions can exhibit considerable asymmetry, with the polarization behavior of oxidation at a given metal|electrolyte interface differing substantially from that of reduction. The reference-less, microcontact electrode geometry, in which the electrode overpotentials are geometrically constrained to the working electrode (by limiting its area) is experimentally convenient, particularly for fuel cell studies, because the results do not rely on accurate placement of a reference electrode nor must oxidant and reductant gases be sealed off from one another. Here, the conditions under which the critical assumption of this geometry applies -— that the overpotential at the large-area counter electrode can be ignored -— is numerically assessed. It is found that, for cells of sufficiently large area, the effective radius of the counter electrode (which defines the area through which the majority of the current passes) can be expressed directly as a function of electrolyte thickness and the materials properties, σ, the conductivity of the electrolyte, and k, the reaction rate constant for the electrochemical reaction at zero-bias. From this effective radius and the true radius of the working electrode, the fraction of electrode overpotential at the latter, defined as the extent of isolation, can be readily computed. Experimental studies of hydrogen electro-oxidation/proton electro-reduction at the Pt|CsH_2PO_4 interface using two cells of differing dimensions both validate the computational results and demonstrate that asymmetry in such reactions are readily revealed in the micro-electrode, reference-less geometry. The study furthermore confirms the insensitivity of the results to the precise placement of the working electrode, while indicating the importance of very high isolation values (>99%) to ensure that overpotential contributions of the counter electrode do not influence the measurements, particularly as bias is increased

Self-Serving Dictators and Economic Growth

A new line of theoretical and empirical literature emphasizes the pivotal role of fair institutions for growth. We present a model, a laboratory experiment, and a simple cross-country regression supporting this view. We model an economy with an unequal distribution of property rights, in which individuals can free-ride or cooperate. Experimentally we observe a dramatic drop in cooperation (and growth), when inequality is increased by a selfserving dictator. No such effect is observed when the inequality is increased by a fair procedure. Our regression analysis provides basic macroeconomic support for the adverse growth effect of the interaction between the degree and the genesis of inequality. We conclude that economies giving equal opportunities to all are not likely to suffer retarded growth due to inequality in the way economies with self-serving dictators will.inequality, corruption, weak institutions, growth, intentions, dynamic public goods