an experimental investigation of the hahn noll revenue neutral auction for emissions licenses abstract this paper reports on three series of laboratory experiments designed to test the performance of the hahn noll revenue neutral auction rna an alternative institution a no rebate uniform price auction upa is also examined as a benchmark in these experiments the rna markets were little different from upa markets in terms of either prices or market efficiencies the two institutions did differ in terms of the distribution of the gains from exchange and of the propensity of bidders to engage in a certain type of overbidding

prices and the winner s curse we usually assume that increases in supply allocation by rationing and exclusion of potential buyers reduce prices but all these activities raise the expected price in an important set of cases when common value assets are sold furthermore when we make the assumptions needed to rule out these anomalies for symmetric buyers small asymmetries among the buyers necessarily cause the anomalies to reappear our results help explain rationing in initial public offerings and outcomes of spectrum auctions we illustrate our results in the wallet game and in another new game we introduce the maximum game

how to set minimum acceptable bids with an application to real estate auctions in a general auction model with affiliated signals common components to valuations and endogenous entry we compute the equilibrium bidding strategies and outcomes and derive a lower bound on the optimal reserve price this lower bound can be computed using data on past auctions combined with information about the subsequent sales prices of unsold goods we illustrate how to compute the lower bound using data from real estate auctions

empirical implications of equilibrium bidding in first price symmetric common value auctions this paper studies federal auctions for wildcat leases on the outer continental shelf from 1954 to 1970 these are leases where bidders privately acquire at some cost noisy but equally informative signals about the amount of oil and gas that may be present we develop tests of rational and equilibrium bidding in a common values model that are implemented using data on bids and ex post values we also use data on tract location and exposr values to test the comparative static prediction that bidders may bid less aggressively in common value auctions when they expect more competition we find that bidders are aware of the winner s curse and their bidding is largely consistent with equilibrium

recent progress in the empirical analysis of multi unit auctions abstract i discuss some recent progress in the empirical analysis of multi unit auctions through which a number of important commodities treasury bills and bonds electricity emission permits monetary infusions by some central banks are allocated

efficient and durable decision rules with incomplete information we compare six concepts of efficiency for economies with incomplete information depending on the stage at which individuals welfare is evaluated and on whether incentive constraints are recognized an example is shown in which an incentive efficient decision rule may be unanimously rejected by the individuals in the economy we define durable decision rules which can resist such unanimous rejection and show that efficient durable decision rules exist

a direct mechanism characterization of sequential bargaining with one sided incomplete information we characterize the sequential equilibria of a class of infinite horizon bargaining games with one sided incomplete information when the seller the uninformed party makes all the offers we prove a folk theorem every incentive compatible individually rational direct bargaining mechanism is implementable by sequential equilibria introducing buyer counteroffers eliminates outcomes which are unfavorable to that party as the proportion of buyer offers increases the set of implementable mechanisms shrinks continuously when the proportion reaches one only the single outcome most favorable to the buyer remains thus depending on the offer structure sequentiality may or may not impose restrictions beyond static incentive compatibility

the optimal mechanism for selling to a budget constrained buyer abstract this paper finds an optimal mechanism for selling a good to a buyer who may be budget constrained we consider a seller with one unit of a good facing a buyer with a quasilinear utility function if the buyer does not face a binding budget constraint textbook monopoly pricing is optimal by contrast the possibility of a binding budget constraint can make it optimal for the seller to use nonlinear pricing to commit to a declining price sequence to require the buyer to disclose his budget or to offer financing journal of economic literature classification numbers c70 d42 d45 d89 l12

resolving differences in willingness to pay and willingness to accept reply gwendolyn c morrison 1997 raises a logical point regarding our experimental test of the divergence between willingness to pay wtp and willingness to accept wta measures of economic value shogren et al 1994 she argues that our design does not provide a true test of the existence of a fundamental endowment effect since we did not control for the potential of a pivoting indifference map daniel kahneman et al 1990 she concludes that even though our ev idence shows that the mean wtp and wta bids for market goods with close substitutes e g candy bars and coffee mugs converge after market experience the endowment effect might still be alive and well albeit at statisti cally insignificant levels

structural estimation of the affiliated private value auction model we consider the structural estimation of the affiliated private value apv model in first price sealed bid auctions the model allows for bidders individual efficiencies and opportunity costs while permitting dependence among bidders private values through affiliation we establish the nonparametric identification of the apv model characterize its theoretical restrictions and propose a computationally convenient and consistent two step nonparametric estimation procedure for estimating the joint private value distribution from observed bids using simulated bid data we provide a step by step guide on how to implement our procedure and show the good behavior of our estimator in small samples

procurement auctions under quality manipulation corruption abstract in procurement quality manipulation corruption arises when the agent tasked with quality evaluation exaggerates the quality of a corrupt firm if an inefficient firm is favored by the agent the buyer can adjust the procurement mechanism such that the corruption rent of the inefficient firm erodes the technological rent of the efficient firm however doing so may require procuring the project at an undesirable quality level to resolve this trade off between corruption deterrence and quality distortion unlike standard results in the literature the buyer may overstate her preference for quality and the dominance of scoring auctions over minimum quality auctions disappears

ratifiable mechanisms learning from disagreement in a mechanism design problem participation constraints require that all types prefer the proposed mechanism to some status quo if equilibrium play in the status quo mechanism depends on the players beliefs then the inference drawn if someone objects to the proposed mechanism may alter the participation constraints we investigate this issue by modeling the mechanism design problem as a two stage process consisting of a ratification state followed by the actual play of the chosen game we develop and illustrate a new concept ratifiability that takes account of inferences from a veto in a consistent way

collusion in second price auctions with heterogeneous bidders abstract we show that efficient collusion by any subset of bidders in second price private value auctions is possible even when the bidders are heterogeneous an important property of efficient collusion is that a bidder s net payoff from participating in collusion is independent of her valuation we show that the cooperative game whose characteristic function evaluated at a coalition is the ex ante collusive surplus of that coalition has a nonempty core a feature of more technical interest is the mechanism characterization when the private information of agents does not enter in a linear or even piecewise linear manner

a study of collusion in first price auctions this paper examines the bidding for school milk contracts in florida and texas during the 1980s in both states firms were convicted of bid rigging the data and legal evidence suggest that the cartels in the two states allocate contracts in different ways one cartel divides the market among members while the other cartel also uses side payments to compensate members for refraining from bidding we show that both forms of cartel agreements are almost optimal provided the number of contracts is sufficiently large in the auction the cartel bidder may face competition from non cartel bidders the presence of an optimal cartel induces an asymmetry in the auction the selected cartel bidder is bidding as a representative of a group and has on average a lower cost than a non cartel bidder the data support the predicted equilibrium bidding behaviour in asymmetric auctions in accordance with optimal cartels

collusion and signaling in auctions with interdependent values abstract the standard approach to collusion in auctions posits an uninformed disinterested third party who prior to the auction designs and implements a collusive mechanism in environments where collusion agreements are likely to be both proposed and executed by the involved parties this approach may neglect information leakages from simply a proposal to collude we consider a model of collusion where one informed bidder proposes to another as in es and schummer 2004 we allow for general interdependent values and affiliated signals in contrast to third party modeling approaches collusion is inefficient from both a social perspective except for the case of pure common values and from the perspective of the ring both bidders are better off than without colluding but the surplus extracted from the seller is distributed asymmetrically between the bidders the potential for information leakage from proposing is bad for low types who reveal that they are weak competitors but is advantageous for high types because they are able to signal their strength we identify a so called briber s curse whereby acceptance of a proposal causes the proposer to downgrade her expected value for the object when there is additional competition in the form of bidders outside of the cartel the briber s curse significantly harms cartel profits and raises seller revenues

collusive bidder behavior at single object second price and english auctions models of collusive bidder behavior at single object second price and english auctions are provided the ind ependent private values model is generalized to permit the formulatio n of coalitions and a strategic response by the auctioneer cooperati ve strategies are found to be dominant in these models coalitions of any size are viable and the payoff to each member increases with th e size of the coalition in addition the collusive strategies of the coalition represent a noncooperative equilibrium the optimal respon se of the auctioneer is to establish a reserve price that is a functi on of the coalition s size these and other features of the model are found to be consistent with the essential features of actual behavio r copyright 1987 by university of chicago press

modelling the non market environmental costs and benefits of biodiversity projects using contingent valuation data cv studies rarely ask willingness to accept wta questions yet there are a range of environmentalprojects where there are likely to be potential losersas well as gainers this paper presents evidence fromsix biodiversity projects that the inclusion ofcontingent compensation payments from thoserespondents who preferred the status quo cansubstantially reduce net project benefits even whenthe proportion of losers is relatively small astatistical model for estimating the mean welfaremeasure from dichotomous choice data which allows forboth positive wtp zero wtp and wta is described asmany environmental projects are likely to create bothgainers and losers we recommend that cv analysts giveserious consideration to the collection and analysisof wta data otherwise they risk generating biasedestimates of project benefits

introduction to the special issue on the econometrics of auctions 2004 jean jacques la ont s contributions are important in many elds in economics yet he still managed to spare some of his time to help to trigger the scienti c quality uplift inthe empirical analysis of auctions papers in this special issue continue this project and usejean jacques papers in the various dimensions of his work in theory econometric identi cation estimation and empirical results of auctions this is why we wish to dedicate this special issueto the memory of jean jacques la ont and to his so formidable capacity of doing and inspiringexcellent research in applied and theoretical economics in estimating risk aversion from ascending and sealed bid auctions jingfeng lu andisabelle perrigne rely on multiple source of data t o identify the risk aversion of bidders previousresearch using experimental or eld data had proven the importance of risk aversion albeit ina parametric way risk aversion is di cult to identify non parametrically in the private valueparadigm if information consists only in observed bids athey and haile 2007 in particular the in uence of risk aversion on observed bids of di erent organizational forms for the auction is

informational rents in oil and gas concession auctions in brazil abstract this article aims to estimate the informational rents earned by winning bidders in oil and gas exploration and production auctions in brazil we estimate the distributions of bids and bidders private valuations using a nonparametric structural model and assuming independence and asymmetry between participants petrobras the brazilian state owned petroleum giant and former oil sector monopolist was considered a competitor that was distinct from other competitors thus we investigate a database based on information from all auctions held between 1999 and 2008 the results suggest that petrobras earned significantly higher information rents than other competitors such rents ranged from 15 to 63 depending on the number and type of competitors

standard auctions with financially constrained bidders we develop a methodology for analyzing the revenue and efficiency performance of auctions when buyers have private information about their willingness to pay and ability to pay we then apply the framework to scenarios involving standard auction mechanisms in the simplest case where bidders face absolute spending limits first price auctions yield higher expected revenue and social surplus than second price auctions the revenue dominance of first price auctions over secondprice auctions carries over to the case where bidders have access to credit these rankings are explained by differences in the extent to which financial constraints bind in different auction formats

optimal bidding in auctions from a game theory perspective abstract the game theoretic perspective in auction bidding has provided a powerful normative framework for the analysis of auctions and it has generated an impressive volume of research contributions tracing this research we review key recent advances which have greatly expanded our understanding of the operation of auctions and produced a more accurate analysis of mechanism design and optimal bidding we follow various experimental studies which have shown that the predictive power of auction theory remains in many cases limited for this reason we concentrate on research themes which enhance the applicability of auction theory leading to more realistic descriptions of bidding behaviors we identify important innovations which expand the environment of auction bidding and carry us beyond rational decision making we conclude providing directions of future research and discussing their implications

collusion and price rigidity we consider an in nitely repeated bertrand game in which prices are publicly observed and each rm receives a privately observed i i d cost shock in each period we focus on symmetric perfect public equilibria sppe wherein any punishments are borne equally by all rms we identify a tradeoff that is associated with collusive pricing schemes in which the price to be charged by each rm is strictly increasing in its cost level such fully sorting schemes offer efficiency bene ts as they ensure that the lowest cost rm makes the current sale but they also imply an informational cost distorted pricing and or equilibrium path price wars since a higher cost rm must be deterred from mimicking a lower cost rm by charging a lower price a rigid pricing scheme where a rm s collusive price is independent of its current cost position sacri ces efficiency bene ts but also diminishes the informational cost for a wide range of settings the optimal symmetric collusive scheme requires i the absence of equilibrium path price wars and ii a rigid price if rms are sufficiently impatient however the rigid pricing scheme cannot be enforced and the collusive price of lower cost rms may be distorted downward in order to diminish the incentive to cheat when the model is modi ed to include i i d public demand shocks the downward pricing distortion that accompanies a rm s lower cost realization may occur only when current demand is high

modelling winners and losers in contingent valuation of public goods appropriate welfare measures and econometric analysis contingent valuation is now the most widely used method for valuing non marketed goods in cost benefit analysis yet despite the fact that many externalities manifest themselves as costs to some and benefits to others most studies restrict willingness to pay to being non negative this can result in significant errors in policymaking this paper examines the importance of this explores appropriate welfare measures for assessing losses and gains demonstrates how these can be elicited explicitly highlights the sensitivity of the results of such studies to the econometric specification employed and suggests ways of dealing with it finally the implica tions for policy are examined assessment including passive use values this technique has become the most widely used method for placing values on non marketed goods this paper examines some outstanding issues in relation to the validity of the method as a basis for policy making in particular most studies ignore the fact that many externalities manifest themselves as costs to some and benefits to others in addition the results of contingent valuation studies are often quite sensitive to the econometric specification assumed the significance of these issues is examined techniques for their resolution are outlined and the implications for public policy are highlighted the importance for economists of the debate on the validity of contingent valuation was emphasised in a series of papers from a symposium on the contingent valuation method cvm published in the journal of economic perspectives in 1994 in his paper portney 1994 predicted that whether the economics profession liked it or not the cvm would inevitably play a role in public policy formulation and therefore it was important that economists be aware of the controversies and have their say on the topic portney s prediction was correct and contingent valuation has become a routine approach to valuing environmental goods with hundreds of studies being produced each year 1 the cvm places a value on a change in the provision of a public good by asking households in a survey how much they are willing to pay for the change or the minimum compensation they would require if the change were not to happen the role that contingent valuation studies play in public policy is

assessing social costs of inefficient procurement design this paper considers the social costs implied by inefficient allocation of contracts in a first price sealed bid procurement auction with asymmetric bidders we adopt a constrained piecewise linear strategye quilibriumc oncept and estimatet he structural parameterso f the bidders d is tribution of costs we estimate social costs defined as the predicted cost difference between the winning firm and the most efficient bidding firm we also compare the expected procurement costs under two different auction formats the data is collected from procurement auctions of road painting in sweden during 1993 1999 the results indicate that the social costs of inefficient contract allocation is about 2 of total potential production cost and that an effi cient second pricea uction would lower the expected procurementc ost by 2 5 jel d 44 h57 c15

contracting with repeated moral hazard and private evaluations a repeated moral hazard setting in which the principal privately observes the agent s output is studied the optimal contract for a finite horizon is characterized and shown to require burning of resources these are only burnt after the worst possible realization sequence and the amount is independent of both the length of the horizon and the discount factor for the infinite horizon it is shown that there is no loss from restricting the analysis to contracts in which the agent receives a constant efficiency wage and no feedback until he is fired furthermore optimal contracts cannot be replicated by short term contracts a family of fixed interval review contracts is characterized longer review intervals are preferable but harder to implement comparative statics on the review length are carried out finally these contracts are shown approximate first best if players are very patient jel d82 d86

relational incentive contracts standard incentive theory models provide a rich framework for studying informational problems but assume that contracts can be perfectly enforced this paper studies the design of self enforced relational contracts i show that optimal contracts often can take a simple stationary form but that self enforcement restricts promised compensation and affects incentive provision with hidden information it may be optimal for an agent to supply the same inefficient effort regardless of cost conditions with moral hazard optimal contracts involve just two levels of compensation this is true even if performance measures are subjective in which case optimal contracts terminate following poor performance jel c73 d82 l14

numerical analysis of asymmetric first price auctions abstract we propose numerical algorithms for solving first price auction problems where bidders draw independent valuations from heterogeneous distributions the heterogeneity analyzed in this work is what might naturally emerge when subsets of distributionally homogeneous bidders collude bid functions and expected revenues are calculated for two special cases extensions to more general asymmetric first price auctions are discussed journal of economic literature classification numbers d44 c63 c72 d82

bidding rings and the winner s curse this article extends the theory of legal cartels to affiliated private value and common value environments we show that efficient collusion is always possible in private value environments but may not be in common value environments with a binding reserve price in the latter case collusion does more than simply transfer rents from the seller to the buyers it also gives buyers a chance to pool their information prior to trade and make an efficient investment decision however full efficiency may not be compatible with information revelation buyers with high signals may be better off if no one colludes leading to inefficient trade this result provides a possible explanation for the low incidence of joint bidding especially on marginal tracts in u s federal government offshore oil and gas lease auctions

common values and low reserve prices i show that the benefit of a high reserve price in a common values ascending auction is lower than in the observationally equivalent private values setting put another way when bidders have common values empirical estimation based on a private values model will overstate the value of a high reserve price via numerical examples i show this same ranking typically applies to the level of the optimal reserve price as well and often to the benefit of any reserve price not just high ones with common values the optimal reserve can even be below the seller s valuation which is impossible with private values

the affiliation effect in first price auctions we study the monotonicity of the equilibrium bid with respect to the number of bidders n in affiliated private value models of first price sealed bid auctions and prove the existence of a large class of such models in which the equilibrium bid function is not increasing in n we moreover decompose the effect of a change in n on the bid level into a competition effect and an affiliation effect the latter suggests to the winner of the auction that competition is less intense than she had thought before the auction since the affiliation effect can occur in both private and common value models a negative relationship between the bid level and n does not allow one to distinguish between the two models and is also not necessarily only due to bidders taking account of the winner s curse

what is the cost of low participation in french timber auctions how much is the timber from public forests worth how can the public forest service define a fair market price for standing timber lots what is the cost of low participation in french timber auctions to estimate the value of a timber lot we adopt the transaction evidence appraisal approach using data from timber auctions in lorraine eastern france accounting for the facts that i the seller s reserve prices are secret ii there remain many unsold lots and iii the number of bidders varies from one auction to another taking into account the endogenous participation in our hedonic price equation for the highest bid we estimate that compared to lots that receive two bids the highest bid is 22 lower when there is only one bid and 37 higher when there are three or more bids

econometrics of first price auctions a survey of the theoretical and applied literature the analysis of auctions is an active area of research for both theoretical and empirical economists this paper provides an overview of the literature relevant to the econometrics of auctions from a structural approach perspective the structural approach is a framework to analyze auction data in which theory and econometrics are closely related there are three fundamental issues at the heart of the structural analysis i are there any testable restrictions imposed by the theoretic model on the data ii is it possible to identify the structural elements that characterize an auction without a priori parametric information iii what can be said about feasible estimation procedures which do not rely on parametric assumptions this survey shows how the structural approach literature has answered each question

universal health insurance in the clinton plan coverage as a tax financed public good the financing arrangements embodied in the clinton health reform plan involve some important differences in the way in which public goods are usually financed the subsidies to small low wage firms mandated to provide benefits distort markets in both labor and products and offer incentives for the creation of small firms in addition the financing scheme implicitly envisions a head tax on families at modest income levels but offers a possible rationale for it nevertheless the main reason for many of the financing features appears to be an attempt to hold down the apparent budgetary cost of universal coverage

weak cartels and collusion proof auctions abstract we study private value auctions in which bidders may collude without using side payments in our model bidders coordinate their actions to achieve an outcome that interim pareto dominates the noncooperative outcome we characterize auctions that are collusion proof in the sense that no such coordination opportunities exist and show that the efficient and revenue maximizing auctions are not collusion proof unless all bidders exhibit a concave distribution of valuations we then solve for revenue maximizing collusion proof auctions if distributions of valuations are symmetric and single peaked the optimal selling mechanism is a standard auction with a minimum bid followed by sequential negotiation in case no bidder bids above the minimum bid

alarmist decisions with divergent risk information receipt of multiple sources of risk information ideally should foster sounder decisions under uncertainty this paper s original survey results for environmental risks suggest that the learning process is reasonable in many respects bur it does not accord with a rational bayesian learning model divergent risk assessments from different sources produce extreme violations of rationality as there is inordinate weight on the high risk assessment this alarmist reaction holds for both government and industry information sources this phenomenon may account for the commonly observed phenomenon of public overreaction to highly publicised risks

testing for common costs in the city of helsinki bus transit auctions abstract i study the effects of competition in the city of helsinki bus transit market by conducting two tests for common costs in these first price sealed bid procurement auctions i introduce bidder asymmetry and pooling to the tests i also discuss the need for robustness checks for some arbitrary choices in these tests the information environment seems to be that of common costs the bus companies that have garages close to the contracted routes are influenced more by the common elements than those whose garages are further away more competition does not necessarily lower procurement costs and the city should not necessarily implement costly policies to induce more competition a recent merger of two public companies cannot be criticized from a competition perspective

money burning in subjective evaluation and limited liability a case for pay for performance abstract research on subjective evaluation in principal agent models have shown that the optimal contract should give uniform reward with zero money burning at all but the worst performance in a static game involving two independent tasks with only high or low output possible it is shown that when the agent is subjected to limited liability the optimal contract is more likely to exhibit pay for performance full money burning if both tasks yield low outputs partial money burning for mixed performance of low and high outputs and zero money burning following high output in both tasks

limited liability contracts between principal and agent abstract the optimal strategy of the principal is examined in an environment where there are ex post limitations on the maximum penalty that can be imposed on a riskneutral agent contrary to the case in which such limitations are not imposed it is in the principal s interest to deliberately forego the opportunity to induce socially efficient behavior and to instead design a contract that induces the agent to realize an efficient outcome only in the most productive state of nature and perhaps in certain very unproductive states the properties of the contract are examined in detail

bidder collusion at forest service timber sales allegations of bidder collusion at forest service timber sales in the pacific northwest were common in the 1970s of course prices may be low for reasons other than collusion we formulate an empirical model that allows for both bidder collusion and supply effects and in which we control for demand conditions noncooperative behavior in which a single unit is sold the standard auction model is a special case it is found to be definitively outperformed by a model of collusion we also find that supply effects are dominated by collusion in determining the winning bids in the market

joint ventures and offshore oil lease sales alternative explanations of joint bidding for offshore oil tract leases are examined the models suggest that firms undertake joint bids 1 to reduce risk by spreading ownership across tracts 2 to share technical expertise including information and 3 to ameliorate financial constraints these hypotheses are examined empirically using the multiple logit technique and other tests with data constructed from the baltimore canyon sale of 1976 the results suggest that firms behaviors are consistent with the explanations of diversification and sharing of expertise explanations based on financial constraints are shown to be consistent with the data in the risk averse case but not in the risk neutral case implications of these results for research and policy are discussed

negative values in vickrey auctions some people assign negative values for new products sold on laboratory auction blocks i e irradiated meat we explore bidding behavior in two vickrey auctions when people have positive and negative induced values for the good aggregate bidding in the second price auction is precise but biased highest value positive bidders tend to overstate benefits whereas lowest negative bidders understate losses in contrast bidding behavior in the random nth price auction is demand revealing irrespective of induced value but it is imprecise examining on and off margin bidding behavior we cannot conclude that any segments of demand are significantly different than the demand revealing regression line

asymmetry in first price auctions with affiliated private values collusion and heterogeneity across firms may introduce asymmetry in bidding games a major difficulty in asymmetric auctions is that the bayesian nash equilibrium strategies are solutions of an intractable system of differential equations we propose a simple method for estimating asymmetric first price auctions with affiliated private values considering two types of bidders we show that these differential equations can be rewritten using the observed bid distribution we establish the identification of the model characterize its theoretical restrictions and propose a two step non parametric estimation procedure for estimating the private value distributions an empirical analysis of joint bidding in ocs auctions is provided copyright 2003 john wiley sons ltd

semiparametric estimation of first price auctions with risk averse bidders in view of the non identification of the first price auction model with risk averse bidders this paper proposes some parametric identifying restrictions and a semiparametric estimator for the risk aversion parameter s and the latent distribution of private values specifically we exploit heterogeneity across auctioned objects to establish semiparametric identification under a conditional quantile restriction of the bidders private value distribution and a parameterization of the bidders utility function we develop a multistep semiparametric method and we show that our semiparametric estimator of the utility function parameter s converges at the optimal rate which is slower than the parametric one but independent of the dimension of the exogenous variables thereby avoiding the curse of dimensionality we then consider various extensions including a binding reserve price affiliation among private values and asymmetric bidders the method is illustrated on u s forest service timber sales and bidders risk neutrality is rejected

complements and substitutes in sequential auctions the case of water auctions we use data on sequential water auctions to estimate demand when units are com plements or substitutes a sequential english auction model determines the estimating structural equations when units are complements one bidder wins all units by paying a high price for the first unit thus deterring others from bidding on subsequent units when units are substitutes different bidders win the units with positive probability paying prices similar in magnitude even when the same bidder wins all units we re cover individual demand consistent with this stark pattern of outcomes and confirm it is not collusive but consistent with non cooperative behavior demand estimates are biased if one ignores these features

optimal contracting with subjective evaluation this paper extends the standard principal agent model to allow for subjective evaluation the optimal contract results in more compressed pay relative to the case with verifiable performance measures moreover discrimination against an individual implies lower pay and performance suggesting that the extent of discrimination as measured after controlling for performance may underestimate the level of true discrimination finally the optimal contract entails the use of bonus pay rather than the threat of dismissal hence neither efficiency wages nor the right to dismiss an employee are necessary ingredients for an optimal incentive contract

asymmetry in procurement auctions evidence from snow removal contracts differences in cost efficiency and productivity across firms may introduce asymmetries in procure ment auctions relying on a structural approach this article investigates potential asymmetry among firms bidding for snow removal contracts in montrthe empirical results show that firms located in close proximity have a cost advantage relative to other firms in the most urbanised part of montrbecause of prohibitive equipment storage costs the extent of inefficiency due to asym metry is empirically assessed various policy experiments are performed a bidding preference policy shows that the city could expect to reduce its costs for allocating snow removal contracts when bidders willingness to pay depends in part on observable variables the princi pal s interest is not best served by creating a level auction playing field this article studies procurement auctions for snow removal contracts in montrit investigates the degree to which companies in disadvantageous locations should win even if they do not submit the lowest bid from the submitted bids a novel empirical methodology estimates the extent of cost variation across firms along with its variation within loca tion although the dispersion is substantial the gain from treating bidders unequally is limited when observed individual characteristics affect the firms costs and their bidding strategies all bidders cannot be treated alike these differences in characteristics or asymmetries among bidders may arise from their size as noted by laffont et al 1995 their capacity constraints as in jofre bonet and pesendorfer 2003 or the possession of better information as in hendricks and porter 1988 and hendricks et al 1994

bidding behavior in experimental auctions with positive and negative values abstract we test for consistency between bids from endowment auctions that allow positive or negative bids for an exchange between two items and bids from prior full bidding auctions for the same items results suggest that positive wtp bids in the endowment auction are demand revealing but subjects overbid in absolute value their negative wta values wta bids were lower in a random n th price auction than in a 5th price auction

identification and estimation of stochastic bargaining models stochastic sequential bargaining models merlo and wilson 1995 1998 have found wide applications in different fields including political economy and macroeconomics due to their flexibility in explaining delays in reaching an agreement this paper presents new results in nonparametric identification and estimation of such models under different data scenarios

identification and estimation of auction models with unobserved heterogeneity 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 non parametric estimation procedure that 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

addressing negative willingness to pay in dichotomous choice contingent valuation this paper has four purposes first we outline the controversy surroundingthe issue of negative willingness to pay wtp in contingent valuation cv studies second we use monte carlo simulation to examine theperformance of alternative distributionalassumptions in estimating wtp in the presenceof varying proportions of the populationholding negative wtp values we focus ondichotomous choice cv dc cv where negativewtp values may be especially difficult todetect third we extend the simulation toinvestigate the performance of the mixturemodels that have recently been proposed forhandling identifying non positive wtp values fourth we extend the simulation to investigatethe performance of the nonparametric lowerbound turnbull approach results indicate thatthe relative performance of the dc cv modelingalternatives evaluated here which assumepositive wtp varies across the simulationsetting e g proportion of negative wtp butnone can be said to reasonably solve theproblem ex post this underscores theimportance of ex ante efforts to identify ifnegative wtp is likely to be prominent in agiven valuation setting in such cases appropriately handling negative wtp must beaddressed through ex ante survey design andmodeling choices that allow negative wtp

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

performance responses to competition across skill levels in rank order tournaments field evidence and implications for tournament design tournaments are widely used in the economy to organize production and innovation we study individual data on 2775 contestants in 755 software algorithm development contests with random assignment the performance response to added contestants varies nonmonotonically across contestants of different abilities precisely conforming to theoretical predictions most participants respond negatively whereas the highest skilled contestants respond positively in counterfactual simulations we interpret a number of tournament design policies number of competitors prize allocation and structure number of divisions open entry and assess their effectiveness in shaping optimal tournament outcomes for a designer

using laboratory experimental auctions in marketing research a case study of new packaging for fresh beef this paper illustrates the use of laboratory experimental auctions in a pretest market research program for new products we review the experimental auctions literature discuss the range of auction mechanisms available and present the advantages and disadvantages of using a particular mechanism for a laboratory pretest market we then present a step by step example of how a theoretically incentive compatible auction mechanism fifth price sealed bid was used in a laboratory pretest market for vacuum packaged beef based on the illustration we discuss the potential for using laboratory experimental auctions in pretest market research we present the limitations that may be encountered in such applications and outline research aimed at improving the behavioral properties of the technique

simultaneous allocation of bundled goods through auctions assessing the case for joint bidding we study the costs and benefits of allowing joint bidding in multiple simultaneous first price sealed bid auctions for bundled goods with private values joint bidding raises the prospect of higher allocative efficiency but also reduces the number of bidders resulting in an ambiguous net impact on seller revenue the research was carried out using laboratory experiments in which groups of up to six buyers competed for eight bundles of two separable goods each the main results show that in our experimental environment allowing joint bidding increases efficiency by 11 3 and revenue by 9 4 the research has immediate applications to the sale of public forest stands that arbor a mixture of species for this reason we explore how the results are affected by excess supply the presence of dominant firms and the removal of an allocation rule requiring multiple bidders under certain circumstances

identification of standard auction models this paper presents new identification results for models of first price second price ascending english and descending dutch auctions we consider a general specification of the latent demand and information structure nesting both private values and common values models and allowing correlated types as well as ex ante asymmetry we address identification of a series of nested models and derive testable restrictions enabling discrimination between models on the basis of observed data the simplest model symmetric independent private values is nonparametrically identified even if only the transaction price from each auction is observed for richer models identification and testable restrictions may be 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 while many private values pv models are nonparametrically identified and testable with commonly available data identification of common values cv models requires stringent assumptions nonetheless the pv model can be tested against the cv alternative even when neither model is identified

valuing dealers informational advantage a study of canadian treasury auctions in many financial markets dealers have the advantage of observing the orders of their customers to quantify the economic benefit that dealers derive from this advantage we study detailed data from canadian treasury auctions where dealers observe customer bids while preparing their own bids in this setting dealers can use information on customer bids to learn about i competition that is the distribution of competing bids in the auction and ii fundamentals that is the ex post value of the security being auctioned we devise formal hypothesis tests for both sources of informational advantage in our data we do not find evidence that dealers are learning about fundamentals we find that the information about competition contained in customer bids accounts for 13 27 of dealers expected profits

the performance of corporate alliances evidence from oil and gas drilling in the gulf of mexico abstract i use data on oil and gas drilling in the gulf of mexico to measure how a corporate alliance a group of firms that jointly develops an offshore tract performs relative to a solo firm i employ a regression discontinuity strategy based on bids in first price sealed bid auctions for the rights to develop leases by focusing on leases where one organizational form narrowly outbids the other i measure drilling outcomes while controlling for the endogenous matching of projects and organizational forms solo firm leases are less profitable than alliance leases because alliance members combine their information and expertise

preference elicitation under oath eliciting sincere preferences for non market goods remain a challenge due to the discrepency between hypothetical and real behavior and false zeros the gap arises because people either overstate hypothetical values or understate real commitments or a combination of both herein we examine whether the traditional real world institution of the solemn oath can improve preference elicitation applying the social psychology theory on the oath as a truth telling commitment device we ask our bidders to swear on their honour to give honest answers prior to participating in an incentive compatible second price auction the oath is an ancillary mechanism to commit bidders to bid sincerely in a second price auction results from our induced valuation testbed treatments suggest that the oath only auctions outperform all our other auctions real and hypothetical in our homegrown valuation treatments eliciting preferences for dolphin protection the oath only design induced people to treat as binding both their experimental budget constraint i e lower values on the high end of the value distribution and participation constraint i e positive values in place of the zero bids used to opt out of auction based on companion treatments we show the oath works through an increase in the willingness to tell the truth due to a strengthening of the intrinsic motivation to do so

budget constrained sequential auctions with incomplete information i study a budget constrained private valuation sealed bid sequential auction with two incompletely informed risk neutral bidders in which the valuations and income may be non monotonic functions of a bidder s type multiple equilibrium symmetric bidding functions may exist that differ in allocation efficiency and revenue the sequence of sale affects the competition for a good and therefore also affects revenue and the prices of each good in a systematic way that depends on the relationship among the valuations and incomes of bidders the sequence of sale may affect prices and revenue even when the number of bidders is large relative to the number of goods if a particular good say is allocated to a strong bidder independent of the sequence of sale then auction revenue and the price of good are higher when good is sold first

competition in the economic crisis analysis of procurement auctions we study the effects of the recent economic crisis on firms bidding behavior and markups in sealed bid auctions using data from austrian construction procurements we estimate bidders construction costs within a private value auction model we find that markups of all bids submitted decrease by 1 5 percentage points in the recent economic crisis markups of winning bids decrease by 3 3 percentage points we also find that without the government stimulus package this decrease would have been larger these two pieces of evidence point to pro cyclical markups

bounds on revenue distributions in counterfactual auctions with reserve prices measuring auction revenues under counterfactual reserve prices or formats requires knowledge of distributions of bidders values and private signals this poses a challenge when bids are observed from rst price common value auctions i bound counterfactual revenue distributions without imposing parametric restrictions on the model structure using data from u s municipal bond auctions i nd rst price and second price auctions under optimal reserve prices lead to little improvement in revenues over existing rst price formats the number of bidders has a more signi cant impact on revenues in optimal auctions i also nd invoking an incorrect assumption of private values in counterfactual analyses results in small errors in predicting revenues from optimal sp auctions

strategic decision making with information and extraction externalities a structural model of the multistage investment timing game in offshore petroleum production when individual petroleum producing firms make their exploration and development investment timing decisions positive information externalities and negative extraction externalities may lead them to interact strategically with their neighbors this paper examines whether these inefficient strategic interactions take place by estimating a structural econometric model of the firms multi stage investment timing game results show that firms interact strategically on small tracts but not on large tracts for small tracts having a neighboring tract explored reduces real profits by about 26 million while having a neighboring tract developed raises real profits by about 3 5 million

multi dimensional reference dependent preferences in sealed bid auctions how most laboratory experiments differ from the field abstract we study bidding behavior in first and second price sealed bid auctions with loss averse agents our model predicts overbidding in first price induced value auctions consistent with evidence from most laboratory experiments substantially different bidding behavior could result in commodity auctions where money and auction item are consumed along different dimensions of the consumption space differences also result in second price auctions our study thereby indicates that transferring qualitative behavioral findings from induced value laboratory experiments to the field may be problematic if subjects are loss averse