We develop tests for common values at first-price sealed-bid auctions. Our tests are nonparametric, require observation only of the bids submitted at each auction, and are based on the fact that the "winner's curse" arises only in common values auctions. The tests build on recently developed methods for using observed bids to estimate each bidder's conditional expectation of the value of winning the auction. Equilibrium behavior implies that in a private values auction these expectations are invariant to the number of opponents each bidder faces, while with common values they are decreasing in the number of opponents. This distinction forms the basis of our tests. We consider both exogenous and endogenous variation in the number of bidders. Monte Carlo experiments show that our tests can perform well in samples of moderate sizes. We apply our tests to two different types of U.S. Forest Service timber auctions. For unit-price ("scaled") sales often argued to fit a private values model, our tests consistently fail to find evidence of common values. For "lumpsum" sales, where a priori arguments for common values appear stronger, our tests yield mixed evidence against the private values hypothesis.
Di erences in the e ectiveness and side e ects of di erent drugs introduces uncertainty into pharmaceutical demand. This in turn introduces dynamic aspects to drug choice: patients have an incentive to experiment to gain information useful for future choices. Exploiting a rich panel dataset on anti-ulcer drug prescriptions, the purpose of this paper is to measure the importance of uncertainty and learning for pharmaceutical drugs.To do so, we specify and estimate a dynamic structural model of demand for anti-ulcer drugs which embeds drug choice in a patient's multi-period expected utility maximization problem. Patients learn in Bayesian fashion about the e ectiveness of alternative drugs. Our results suggest that patients have considerable uncertainty as they begin treatment, but that it decreases quickly with drug use. Simulations imply increases in treatment costs due to uncertainty are modest, ranging from 1.5-4.2 depending on illness severity.
We show how the equilibrium restrictions implied by standard search models can be used to estimate search-cost distributions using price data alone. We consider both sequential and nonsequential search strategies, and develop estimation methodologies that exploit equilibrium restrictions to recover estimates of search-cost heterogeneity that are theoretically consistent with the search models. We illustrate the method using online prices for several economics and statistics textbooks.2 Also see Brown and Goolsbee (2002) and Scott-Morton, Zettelmeyer, and Silva-Risso (2001) for studies of how the Internet has reduced transactions costs (part of which are price search costs) for insurance and automobiles.3 See Sorensen (2001) and Hortacsu and Syverson (2005) for structural analyses of search in traditional non-online markets, in which they employ unique datasets in which both price and quantity are observed. It is difficult to get this type of data for typical online markets. Similarly, the large empirical search literature in labor economics (e.g., Eckstein and Wolpin, 1990) often uses not only wage data, but also auxiliary data (such as unemployment and employment durations) to pin down "arrival rate" parameters in job-search models that are missing from price-dispersion models. 4 See Ellison and Ellison (2001) for a study of such phenomena in online computer parts retailers.© RAND 2006. costs-the labor involved in taking and fulfilling orders, the degradation of the firm's computer or warehouse capital, etc.
a b s t r a c tWe consider the identification of a Markov processwhen only {W t } is observed. In structural dynamic models, W t includes the choice variables and observed state variables of an optimizing agent, while X * t denotes time-varying serially correlated unobserved state variables (or agent-specific unobserved heterogeneity). In the non-stationary case, we show that the Markov law of motionis a crucial input in methodologies for estimating Markovian dynamic models based on the ''conditional-choiceprobability (CCP)'' approach pioneered by Hotz and Miller.
We introduce a measure of the severity of violations of the revealed preference axioms, the money pump index (MPI). The MPI is the amount of money one can extract from a consumer who violates the axioms. It is also a statistical test for the hypothesis that a consumer is rational when behavior is observed with error. We present an application using a panel data set of food expenditures. The data exhibit many violations of the axioms. Mostly, the MPI for these violations is small. The MPI indicates that the hypothesis of consumer rationality cannot be rejected.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
customersupport@researchsolutions.com
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.