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

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

updating the reserve price in common value auctions we consider a common value auction model with bidder participation determined jointly by nature and by bidder optimization in this framework an increase in the reserve price as two effects it deters marginal bidders and it deters bidders from becoming informed we then derive a test statistic for establishing when it is optimal to raise the reserve price this statistic is independent of the distribution of valuations we then apply the analysis to u s offshore oil sales and find evidence that the reserve price is dramatically too low this abstract was borrowed from another version of this item

the probability of sale and price premiums in withdrawn auctioned properties this paper examines the impact of the auction process of residential properties that whilst unsuccessful at auction sold subsequently the empirical analysis considers both the probability of sale and the premium of the subsequent sale price over the guide price reserve and opening bid the findings highlight that the final achieved sale price is influenced by key price variables revealed both prior to and during the auction itself factors such as auction participation the number of individual bidders and the number of bids are significant in a number of the alternative specifications

testing for price anomalies in real estate auctions this paper reports on the results of an auction sale of 83 condominium apartment units in new jersey at the auction every unit was hammered down but unknown to the 2 348 registered bidders 40 of the sales fell through prices in the subsequent sale of condominium units in face to face negotiations resulted in identical units selling for 13 less than they fetched at auction and the discount was largest for those units hammered down early in the auction these results are inconsistent with the usual predictions from the theory of common value auctions and suggest that uninformed bidders in this auction may have been the subject of a winner s curse which generated considerable profit for the seller this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from ano this abstract was borrowed from another version of this item

equilibrium in auctions with entry the authors model entry incentives in auctions with risk neutral bidders and characterize a symmetric equilibrium in which the number of entrants is stochastic the presence of too many potential bidders raises coordination costs that detract from welfare the authors show that the seller and society can benefit from policies that reduce market thickness i e the relative abundance of buyers their analysis extends well known revenue equivalence and ranking theorems but also demonstrates that variations in the auction environment affect optimal policies e g reservation prices in ways not anticipated by models that ignore entry copyright 1994 by american economic association

a quantitative model of sovereign debt bailouts and conditionality in times of sovereign debt crises international financial institutions provide temporary financial support contingent on the implementation of specific macroeconomic policies this paper develops a model of sovereign debt and default with endogenous participation rates in bailout programs conditionality enters as a constraint on fiscal policy in the model the insurance character of bailouts generates incentives for debt accumulation quantitative results suggest that bailouts prevent sovereign defaults in the short run but may come at a cost of a greater default probability in the long run increasing the intensity of conditionality lowers the bailout participation rate and generates a hump shaped pattern of sovereign default risk

auctions with a stochastic number of bidders abstract auction theory is generalized by allowing the number of bidders to be stochastic in a first price sealed bid auction with bidders having constant absolute risk aversion the expected selling price is higher when the bidders do not know how many other bidders there are than when they do know this thus the seller should conceal the number of bidders if he can moreover a bidder s ex ante expected utility is the same whether or not there is a policy of concealing the number of bidders concealment therefore pareto dominates announcement with risk neutral bidders the optimal auction is the same whether or not the bidders know who their competitors are

tax base variability and procyclical fiscal policy in developing countries abstract based on a sample of 56 countries we show that fiscal policy in the g7 countries appears to be acyclical while fiscal policy in developing countries is procyclical i e fiscal policy is expansionary in good times and contractionary in bad times to explain this puzzle we develop an optimal fiscal policy model in which running budget surpluses is costly because they create pressures to increase public spending given this distortion a government that faces large fluctuations in the tax base as is the case for developing countries will find it optimal to run a procyclical fiscal policy

the dynamics of sovereign default risk and political turnover abstract this paper develops a stochastic dynamic politico economic model of sovereign debt to analyze the interaction of sovereign default risk and political turnover two parties differ in their preferred size of unproductive public spending which is financed by taxes and external debt electoral outcomes are characterized by the economic benefits from the incumbent s policies and stochastic idiosyncratic ideological aspects quantitative findings suggest that endogenous political turnover increases the discrepancies between the optimal borrowing and default policies of the two parties prior to a debt crisis the incumbent government accumulates external debt to foster the probability of remaining in power the dynamic interaction of electoral outcomes external debt and sovereign default supports arguments for imposing institutional constraints on incumbent governments

economic insights from internet auctions this paper surveys recent studies of internet auctions four main areas of research are summarized first we survey several studies that document and attempt to explain the frequently observed sniping or last second bidding behavior in these auctions second we summarize several methods proposed to quantify the distortions caused by asymmetric information in these markets most notably due to the winner s curse third we explore research about the role of reputation mechanisms installed to help combat these distortions finally we discuss what internet auctions have to teach us about auction design

sequentially optimal auctions abstract in auctions where a seller can post a reserve price but if the object fails to sell cannot commit never to attempt to resell it revenue equivalence between repeated first price and second price auctions without commitment results when the time between auctions goes to zero seller expected revenues converge to those of a static auction with no reserve price with many bidders the seller equilibrium reserve price approaches the reserve price in an optimal static auction an auction in which the simple equilibrium reserve price policy of the seller mirrors a policy commonly used by many auctioneers is computed journal of economic literature classification numbers c78 d44 d82

sovereign and private default risks over the business cycle abstract sovereign debt crises are often accompanied by deep recessions with sharp declines in external credit to the private sector in a sample of emerging economies we find that both sovereign and private interest rate spreads are countercyclical this paper presents a model of a small open economy that accounts for these empirical regularities it includes private firms which finance a fraction of imports by external debt and are subject to idiosyncratic productivity risk and a government which borrows internationally and taxes firms to finance public expenditures the model gives rise to endogenous private and sovereign interest rate spreads and a dynamic feedback mechanism between sovereign and private default risks through the endogenous response of fiscal policy to adverse productivity shocks

selling online versus live a seller choosing between auctioning online and live faces a tradeoff lower transaction costs online against more rents left with the bidders we model this tradeoff and apply the theory to auctions of art the crucial parameter for whether the seller does better online than live is not the expected price but the valuation uncertainty

revenue ranking of discriminatory and uniform auctions with an unknown number of bidders an important managerial question is the choice of the pricing rule we study whether this choice depends on the uncertainty about the number of participating bidders by comparing expected revenues under discriminatory and uniform pricing within an auction model with affiliated values stochastic number of bidders and linear bidding strategies we show that if uncertainty about the number of bidders is substantial then the discriminatory pricing generates higher expected revenues than the uniform pricing in particular the first price auction might generate higher revenues than the second price auction therefore uncertainty about the number of bidders is an important factor to consider when choosing the pricing rule we also study whether eliminating this uncertainty i e revealing the number of bidders is in the seller s interests and discuss the existence of an increasing symmetric equilibrium

how auctions work for wine and art interview auctioneers and even to buy a little wine in the meantime i have also had the opportunity with john abowd 1988 to observe and collect data on the auction sale of impressionist and contemporary paintings this paper reports on some of the empirical regularities that i and others have observed in the actual operation of the auction markets for these items in view of the rich and diverse array of theoretical literature on auctions it seems high time economists began to spell out precisely what facts it is meant to explain 2

alternative common value auction procedures revenue comparisons with free entry the logic of revenue comparisons for different types of common value auctions is substantially altered if the number of participants rather than being fixed responds endogenously to the expected profitability from participating in a thoroughly symmetric model a seller may prefer that competition be indirect an auction procedure in which fewer participants are needed to drive the expected profitability from participating down to the level obtainable in other auctions in the economy can attain higher expected revenue if a sale is sufficiently likely this insight allows a complete revenue ranking of standard auction procedures with endogenous entry

entry and competition effects in first price auctions theory and evidence from procurement auctions motivated by several interesting features of the highway mowing auction data from the texas department of transportation tdot we study three competing procurement auction models with endogenous entry our entry and bidding models provide several interesting implications for the first time we show that even within an independent private value paradigm as the number of potential bidders increases bidders equilibrium bidding behaviour can become less aggressive and the expected procurement cost may rise because the entry effect is always positive and may dominate the negative competition effect we then develop structural models of entry and bidding corresponding to the three models under consideration controlling for unobserved auction heterogeneity and use the recently developed semi parametric bayesian estimation method to analyse the data we select the model that best fits the data and use the corresponding structural estimates to quantify the entry effect and the competition effect with regard to the individual bids and the procurement cost copyright 2009 wiley blackwell

sovereign defaults and liquidity crises abstract sovereign debt crises in emerging markets are usually associated with liquidity and banking crises the conventional view is that the domestic turmoil is the consequence of foreign retaliation although there is no clear empirical evidence on classic default penalties this paper emphasizes instead a direct link between sovereign defaults and liquidity crises building on two natural assumptions i government bonds represent a source of liquidity for the domestic private sector and ii the government cannot discriminate between domestic and foreign creditors in the event of default in this context external debt emerges even in the absence of classic penalties and government default is countercyclical triggers a liquidity crunch and amplifies output volatility in addition a reform that involves a substitution of government bonds with privately sourced liquidity instruments could backfire by restricting governments access to foreign credit

equilibria in first price auctions with participation costs this paper characterizes the equilibria of first price auctions with participation costs in the independent private values environment bidders use cutoff strategies to decide whether they will participate in the auction it is shown that when bidders are homogeneous there always exists a unique symmetric equilibrium and further there is no other equilibrium when valuation distribution functions are inelastic when distribution functions are elastic at the symmetric equilibrium there exists an asymmetric equilibrium inelasticity elasticity includes concavity convexity of distribution functions as a special case we find similar results when bidders are heterogeneous

china s land market auctions evidence of corruption this paper studies the urban land market in china in 2003 2007 in china all urban land is owned by the state leasehold use rights for land for re development are sold by city governments and are a key source of city revenue leasehold sales are viewed as a major venue for corruption prompting a number of reforms over the years reforms now require all leasehold rights be sold at public auction there are two main types of auction regular english auction and an unusual type which we call a two stage auction the latter type of auction seems more subject to corruption and to side deals between potential bidders and the auctioneer absent corruption theory suggests that two stage auctions would most likely maximize sales revenue for properties which are likely to have relatively few bidders or are cold which would suggest negative selection on property unobservables into such auctions however if such auctions are more corruptible that could involve positive selection as city officials divert hotter properties to a more corruptible auction form the paper finds that overall sales prices are lower for two stage auctions and there is strong evidence of positive selection the price difference is explained primarily by the fact that two stage auctions typically have just one bidder or no competition despite the vibrant land market in chinese cities

field experiments on the effects of reserve prices in auctions more magic on the internet i present experimental evidence on the effects of minimum bids in first price sealed bid auctions the auction experiments manipulated the minimum bids in a preexisting market on the internet for collectible trading cards from the game magic the gathering i examine a number of outcomes including the number of participating bidders the probability of sale the levels of individual bids and the auctioneer s revenues the benchmark theoretical model is one with symmetric risk neutral bidders with independent private values the results verify a number of the predictions concerning equilibrium bidding many bidders behave strategically anticipating the effects of the reserve price on others bids

the determinants of recovery rates in the us corporate bond market we examine recovery rates of defaulted bonds in the us corporate bond market based on a complete set of traded prices and volumes a study of the trading microstructure around various types of default events is provided we document temporary price pressure with high trading volumes on the default day and the following 30 days and low trading activity thereafter based on this analysis we determine market based recovery rates and quantify various liquidity measures we study the relation between the recovery rates and these measures considering additionally a comprehensive set of bond characteristics firm fundamentals and macroeconomic variables

correlated information and mechanism design in models of asymmetric information possession of private information leads to rents for the possessors this induces mechanism designers to distort away from efficiency the authors show that this is an artifact of the presumption that information is independently distributed rent extraction in a large class of mechanism design games is analyzed and a necessary and sufficient condition for arbitrarily small rents to private information is provided additionally the two person bargaining game is shown to have an efficient solution under first order stochastic dominance and a hazard rate condition similar conditions allow full rent extraction in milgrom weber auctions

entry coordination and auction design with private costs of information acquisition i introduction in most auction literature bidders are passively endowed with private information about their valuations the analysis then focuses on optimal elicitation of private information on many occasions bidders may instead have to incur costs to collect this information 1 auction design in these cases has to balance between information acquisition and information elicitation which are interdependent the performance of an auction depends not only on the bidding equilibrium but also crucially on the information acquisition equilibrium 2 as a salient feature auction design with information acquisition costs has been complicated by entry coordination among bidders due to multiple entry equilibria issue in a symmetric independent private value ipv setting of mcafee and mcmillan 1987 with fixed information acquisition cost levin and smith 1994 note that the ex ante efficient and revenue maximizing auction a second price auction with no entry fee and no reserve induces many asymmetric entry equilibria other than the targeted symmetric one the existence of asymmetric entry equilibria in this setup fundamentally lies in bidders constant marginal cost of entry 3 information acquisition costs could be private information of bidders just as with their private information about values for example in the cases of construction procurements or u s timber auctions many aspects of prebid information acquisition and analyzation are private knowledge of bidders 4 clearly when information acquisition costs are private information of bidders auction design has to additionally take into account information elicitation at the information acquisition stage this aspect of analysis has yet to be reflected in the literature while the case with fixed information acquisition costs has been thoroughly studied by milgrom 1981 mcafee and mcmillan 1987 engelbrecht wiggans 1987 1993 harstad 1990 levin and smith 1994 mcafee quan and vincent 2002 ye 2004 2007 and cremer spiegel and zheng 2009 among others a widely recognized insight of these studies is that ex ante efficiency can be achieved through a second price auction while setting the reserve at the seller s valuation if ex ante entry fees can be used to extract all the expected surplus of bidders then there is a congruence between the revenue and total surplus 5 this article advances this line of research by studying the implications of private acquisition costs on auction design with an emphasis on bidders coordination at the information acquisition stage specifically we consider the ipv setting of mcafee and mcmillan 1987 and levin and smith 1994 while allowing the information acquisition costs to be bidders private information which follow a continuous distribution in light of our previous discussion this article attempts to answer the following questions 1 how are ex ante efficient and revenue maximizing auctions affected by this additional dimension of private information in other words how does information rent extraction at the entry stage affect the auction designs 2 can this private information alleviate rather than aggravate the problem of entry coordination with the dispersion in private information acquisition costs the multiplicity of entry equilibria arising from the constant marginal cost in levin and smith 1994 might be avoidable the types with higher information acquisition costs must have less incentive to enter which could reduce the number of entry equilibria the questions are will sufficient dispersion coordinate bidders and induce a unique entry if yes how much dispersion is enough due to the potential multiplicity of entry equilibria for any given mechanism it is rather difficult to compare performances across varieties of mechanisms to overcome this difficulty we come up with an alternative approach our analysis begins with characterizing efficient and revenue maximizing auctions for any given feasible entry pattern which can be described through a vector of bidders entry thresholds of acquisition costs

group lending with adverse selection abstract we focus on adverse selection as a foundation of group lending in a simple static model we show that there is no collateral effect if borrowers do not know each other if the borrowers know each other group lending implements efficient lending however it is not robust to collusive behavior when transfers are allowed between colluding partners finally we characterize the optimal collusion proof group contract

sovereign risk and secondary markets conventional wisdom says that in the absence of default penalties sovereign risk destroys all foreign asset trade we show that this conventional wisdom rests on one implicit assumption that assets cannot be retraded in secondary markets without this assumption foreign asset trade is possible even in the absence of default penalties this result suggests a broader perspective regarding the origins of sovereign risk and its remedies sovereign risk affects foreign asset trade only if default penalties are insufficient and secondary markets work imperfectly to reduce its effects one can either increase default penalties or improve the working of secondary markets jel f34 g12 g15

internal debt crises and sovereign defaults internal and sovereign debt crises occur together and happen more frequently in economies with weak bankruptcy institutions this paper provides a novel explanation internal crises arise because of the inability to liquidate private debtors when many default in an optimal contract a successful entrepreneur repays yet an unsuccessful one defaults and liquidates his assets the bounds on liquidation generate however a second equilibrium where domestic borrowers default because others are also defaulting during these coordinated defaults tax collections fall which increases sovereign default risk in the model joint debt crises are an optimal response to informational problems in private sector lending

equilibria in second price auctions with participation costs abstract we investigate equilibria of sealed bid second price auctions with bidder participation costs in the independent private values environment we focus on equilibria in cutoff strategies participate and bid the valuation iff it is greater than the cutoff since if a bidder finds it optimal to participate she cannot do better than bidding her valuation when bidders are symmetric concavity strict convexity of the cumulative distribution function from which the valuations are drawn is a sufficient condition for uniqueness multiplicity within this class we also study a special case with asymmetric bidders and show that concavity convexity plays a similar role

long duration bonds and sovereign defaults abstract this paper extends the baseline framework used in recent quantitative studies of sovereign default by assuming that the government can borrow using long duration bonds this contrasts with previous studies which assume the government can borrow using bonds that mature after one quarter we show that when we assume that the government issues bonds with a duration similar to the average duration of sovereign bonds in emerging economies the model generates an interest rate that is substantially higher and more volatile than the one obtained assuming one quarter bonds this narrows the gap between the predictions of the model and the data which indicates that the introduction of long duration bonds may be a useful tool for future research about emerging economies our analysis is also relevant for the study of other credit markets

rationalizability learning and equilibrium in games with strategic complementarities we study a rich class of noncooperative games that includes models of oligopoly competition macroeconomic coordination failures arms races bank runs technology adoption and diffusion r d competition pretrial bargaining coordination in teams and many others for all these games the sets of pure strategy nash equilibria correlated equilibria and rationalizable strategies have identical bounds also for a class of models of dynamic adaptive choice behavior that encompasses both best response dynamics and bayesian learning the players choices lie eventually within the same bounds these bounds are shown to vary monotonically with certain exogenous parameters we study the class of noncooperative supermodular games introduced by topkis 1979 and further analyzed by vives 1985 1989 who also pointed out the importance of these games in industrial economics supermodular games are games in which each player s strategy set is partially ordered the marginal returns to increasing one s strategy rise with increases in the competitors strategies so that the game exhibits strategic complementarity 2 and if a player s strategies are multidimensional marginal returns to any one com ponent of the player s strategy rise with increases in the other components this class turns out to encompass many of the most important economic applications of noncooperative game theory in macroeconomics diamond s 1982 search model and bryant s 1983 1984 rational expectations models can be represented as supermodular games in each of these models more activity by some members of the economy raises the returns to increased levels of activity by others in oligopoly theory some models of bertrand oligopoly with differentiated products qualify as supermodu lar games in these games when a firm s competitors raise their prices the marginal profitability of the firm s own price increase rises a similar structure is present in games of new technology adoption such as those of dybvig and spatt 1983 farrell and saloner 1986 and katz and shapiro 1986 when more users hook into a communication system or more manufacturers adopt an interface standard the marginal return to others of doing the same often rises similarly in some specifications of the bank runs model introduced by diamond and dybvig 1983 when more depositors withdraw their funds from a bank it is more worthwhile for other depositors to do the same in the warrant exercise

efficient investment in a dynamic auction environment abstract we analyze an environment in which bidders private values change over time due to both private investments and exogenous shocks we demonstrate that a highly decentralized mechanism achieves efficiency the mechanism requires a stage of costly public announcements i e signaling to induce efficient investment for this reason an equilibrium selection issue arises but can be handled by a minor modification in the spirit of virtual implementation

sovereign default interest rates and political uncertainty in emerging markets abstract a large body of the empirical literature shows that high turnover rates length of tenure of policymakers and the degree of conflict within a country affects sovereign spreads debt and default rates we help to rationalize such claims by including these political features in a dynamic stochastic small open economy model of sovereign debt and default in this way we offer a complementary approach to the econometric analyses in the literature consistent with the data the quantitative analysis shows that politically unstable and more polarized economies experience higher default rates and larger level and volatility of sovereign interest rate spreads

bidding off the wall why reserve prices may be kept secret abstract this note shows by means of an example that in a common value auction a seller with a random reservation value can increase her ex ante expected profits by following a policy of conducting an auction in which her reserve price is kept secret compared to an auction in which the reserve price is announced by keeping the reserve price secret the seller is able to encourage greater participation from the bidders and can therefore increase the linkage of the price paid to the value of the purchased object journal of economic literature classification numbers d82 d44

information returns and bidding behavior in ocs auctions 1954 1969 this paper examines federal auctions for leases on the outer continental shelf in the light of the predictions of the first price sealed bid common values model of auctions the authors find that the data strongly support the model for auctions in which one bidder is better informed than the other bidders the evidence for auctions in which bidders have noisy but qualitatively similar information is less conclusive but is consistent with a model in which each bidder does not know either the actual or potential number of bidders on a lease copyright 1987 by blackwell publishing ltd

the winner s curse reserve prices and endogenous entry empirical insights from ebay auctions internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce we examine a unique data set of ebay coin auctions to explore the determinants of bidder and seller behavior we begin by documenting a number of empirical regularities in our data set of ebay auctions next we specify and estimate a structural econometric model of bidding on ebay using our parameter estimates from this model we measure the extent of the winner s curse and simulate seller revenue under different reserve prices