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Asymmetry in first‐price auctions with affiliated private values
Author(s) -
Campo Sandra,
Perrigne Isabelle,
Vuong Quang
Publication year - 2003
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.697
Subject(s) - common value auction , bidding , collusion , economics , mathematical economics , econometrics , nash equilibrium , differential (mechanical device) , value (mathematics) , parametric statistics , microeconomics , mathematics , statistics , engineering , aerospace engineering
Abstract 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.