Are there common values in first-price auctions? A tail-index nonparametric test

Jonathan B. Hill and Artyom Shneyerov

Journal of Econometrics, 2013, vol. 174, issue 2, 144-164

Abstract: We develop a consistent nonparametric test of common values in first-price auctions and apply it to British Columbia Timber Sales data. The test is based on the behavior of the CDF of bids near the reserve price. We show that the curvature of the CDF is drastically different under private values (PV) and common values (CV). We then show that the problem of discriminating between PV and CV is equivalent to estimating the lower tail index of the bid distribution. Our approach admits unobserved auction heterogeneity of an arbitrary form. We develop a Hill (1975)-type tail index estimator and find the presence of common values in BC Timber Sales.

Keywords: First-price auctions; Common values; Private values; Tail index; Timber auctions (search for similar items in EconPapers)
JEL-codes: C14 D44 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:174:y:2013:i:2:p:144-164

DOI: 10.1016/j.jeconom.2013.02.003

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