Robust Inference in First-Price Auctions: Experimental Findings as Identifying Restrictions

Serafin J. Grundl and Yu Zhu
Additional contact information
Serafin J. Grundl: https://www.federalreserve.gov/econres/serafin-j-grundl.htm

No 2019-006, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: In laboratory experiments bidding in first-price auctions is more aggressive than predicted by the risk-neutral Bayesian Nash Equilibrium (RNBNE) - a finding known as the overbidding puzzle. Several models have been proposed to explain the overbidding puzzle, but no canonical alternative to RNBNE has emerged, and RNBNE remains the basis of the structural auction literature. Instead of estimating a particular model of overbidding, we use the overbidding restriction itself for identification, which allows us to bound the valuation distribution, the seller's payoff function, and the optimal reserve price. These bounds are consistent with RNBNE and all models of overbidding and remain valid if different bidders employ different bidding strategies. We propose simple estimators and evaluate the validity of the bounds numerically and in experimental data.

Keywords: Experimental findings; First-price auction; Partial identification; Robust inference; Structural estimation (search for similar items in EconPapers)
JEL-codes: C14 C57 D44 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2019-02-07
New Economics Papers: this item is included in nep-des, nep-ecm, nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.federalreserve.gov/econres/feds/files/2019006pap.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2019-06

DOI: 10.17016/FEDS.2019.006

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().