Structural Econometric Methods in Auctions: A Guide to the Literature

Abstract

Auction models have proved to be attractive to structural econometricians who, since the late 1980s, have made substantial progress in identifying and estimating these rich game-theoretic models of bidder behavior. We provide a guide to the literature in which we contrast the various informational structures (paradigms) commonly assumed by researchers and uncover the evolution of the field. We highlight major contributions within each paradigm and benchmark modifications and extensions to these core models. Lastly, we discuss special topics that have received substantial attention among auction researchers in recent years, including auctions for multiple objects, auctions with risk averse bidders, testing between common and private value paradigms, unobserved auction-specific heterogeneity, and accounting for an unobserved number of bidders as well as endogenous entry.Keywords: auctions, structural econometrics. JEL Classification Numbers: C01, D44. * We were all students of Harry J. Paarsch and would like to express our sincere gratitude and appreciation to him. Harry was not only a pioneer of this literature, but he introduced each of us to the field and continues to inspire us today. We would also like to thank two anonymous referees for helpful suggestions. Any errors are our own.

Replacing Sample Trimming with Boundary Correction in Nonparametric Estimation of First‐Price Auctions

“…It combines game theory and bidding data to shed light on a variety of policy‐relevant questions, such as revenue maximization (cost minimization in procurement), efficiency, and information rents. Structural econometric techniques in auctions have been applied to an array of market settings such as timber, oil and mineral leases, online auctions, government‐backed securities, procurement of taxpayer‐funded services and even college admissions (see Hickman et al , ).…”

Lower price increases, the bounded rationality of bidders, and underbidding concerns in online agricultural land auctions: The Ukrainian case

“…Non-refundable entry costs can often be seen as 'sunk', which may lead to a sunk cost fallacy (Athey & Haile, 2007;Augenblick, 2016;Camerer & Weber, 1999;McAfee et al, 2010), where bidders are less willing to exit a situation as their financial commitments increase (Augenblick, 2016;Camerer & Weber, 1999). Hickman et al (2017Hickman et al ( , 2012, Hickman (2010), and suggest that due to incremental bidding, online auction participants may shade their valuations instead of revealing them. Malmendier and Lee (2011) expected that bidding errors could also be explained by intrinsic lot characteristics, but found narrow empirical evidence supporting this hypothesis.…”

How Accurately Do Structural Asymmetric First-Price Auction Estimates Represent True Valuations?

“…Donald and Paarsch (1993) Donald and Paarsch (1996), Elyakime, Laffont, Loisel, and Vuong (1994), and Laffont, Ossard, and Vuong (1995) established statistically rigorous yet flexible parametric estimation methods. The survey of Hickman, Hubbard, and Saglam (2012) concisely summarizes the literature, while that of Gentry, Hubbard, Nekipelov, and Paarsch (2018) provides a longer treatment of developments in the structural econometrics of auctions.…”