 Robust inference in first-price auctions: Overbidding as an identifying restrictionSerafin Grundl and Yu Zhu Journal of Econometrics, 2023, vol. 235, issue 2, 484-506 Abstract: Laboratory experiments find consistently that bidding in first-price auctions tends to be more aggressive than predicted by the risk-neutral Bayesian Nash Equilibrium (RNBNE) — a finding known as the overbidding puzzle. Several alternative models can explain the overbidding puzzle, but no canonical alternative to RNBNE has emerged. Instead of estimating a particular model of overbidding, we use the overbidding restriction itself for identification, which allows us to bound the valuation distribution and the seller’s revenue under counterfactual reserve prices in the spirit of Haile and Tamer (2003). These bounds are consistent with RNBNE and all models of overbidding, and the bounds remain valid even if there is unobserved heterogeneity in bidding strategies. We evaluate the validity of the bounds numerically and in experimental data. Keywords: First-price auction; Robust inference; Experimental findings; Structural estimation; Partial identification (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:235:y:2023:i:2:p:484-506 DOI: 10.1016/j.jeconom.2022.06.001 Access Statistics for this article Journal of Econometrics is currently edited by T. Amemiya, A. R. Gallant, J. F. Geweke, C. Hsiao and P. M. Robinson More articles in Journal of Econometrics from Elsevier |
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