Asymmetry in first-price auctions with affiliated private values

Quang Vuong, Sandra Campo and Isabelle Perrigne
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Quang Vuong: University of Southern California, Department of Economics, Los Angeles, CA 90089-0253, USA, Postal: University of Southern California, Department of Economics, Los Angeles, CA 90089-0253, USA
Sandra Campo: University of North Carolina, Department of Economics, Chapel Hill, NC 27599-3305, USA, Postal: University of North Carolina, Department of Economics, Chapel Hill, NC 27599-3305, USA
Isabelle Perrigne: University of Southern California, Department of Economics, Los Angeles, CA 90089-0253, USA, Postal: University of Southern California, Department of Economics, Los Angeles, CA 90089-0253, USA

Journal of Applied Econometrics, 2003, vol. 18, issue 2, pages 179-207

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.

Date: 2003
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