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Estimating first-price auctions with an unknown number of bidders: A misclassification approach

An, Yonghong and Hu, Yingyao and Shum, Matthew (2010) Estimating first-price auctions with an unknown number of bidders: A misclassification approach. Journal of Econometrics, 157 (2). pp. 328-341. ISSN 0304-4076.

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In this paper, we consider nonparametric identification and estimation of first-price auction models when N^*, the number of potential bidders, is unknown to the researcher, but observed by bidders. Exploiting results from the recent econometric literature on models with misclassification error, we develop a nonparametric procedure for recovering the distribution of bids conditional on the unknown N^*. Monte Carlo results illustrate that the procedure works well in practice. We present illustrative evidence from a dataset of procurement auctions, which shows that accounting for the unobservability of N^* can lead to economically meaningful differences in the estimates of bidders’ profit margins.

Item Type:Article
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URLURL TypeDescription DOIArticle
Shum, Matthew0000-0002-6262-915X
Additional Information:© 2010 Elsevier B.V. Received 16 April 2008; revised 5 February 2010; accepted 17 February 2010. Available online 25 February 2010. We thank an associate editor, two anonymous referees, Ken Hendricks, Harry Paarsch, Isabelle Perrigne, Jean-Marc Robin, Quang Vuong, and seminar participants at Brown, Caltech, FTC, Harvard-MIT, UC-Irvine, Iowa, NC State, Toronto, Yale, and SITE (Stanford) for helpful comments. Guofang Huang provided exceptional research assistance.
Subject Keywords:Auction models; Nonparametric identification; Misclassification
Issue or Number:2
Record Number:CaltechAUTHORS:20100809-085416741
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:19332
Deposited By: Tony Diaz
Deposited On:10 Aug 2010 21:26
Last Modified:03 Oct 2019 01:55

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