Bidding frictions in ascending auctions

Aaron Barkley, Joachim R. Groeger and Robert A. Miller

Journal of Econometrics, 2021, vol. 223, issue 2, 376-400

Abstract: This paper develops an approach for identifying and estimating the distribution of valuations in ascending auctions where an indeterminate number of bidders have an unknown number of bidding opportunities. To finesse the complications for identification and estimation due to multiple equilibria, our empirical analysis is based on the fact that bidders play undominated strategies in every equilibrium. We apply the model to a monthly financial market in which local banks compete for deposit securities. This market features frequent jump bidding and winning bids well above the highest losing bid, suggesting standard empirical approaches for ascending auctions may not be suitable. We find that frictions are costly both for revenue and allocative efficiency.

Keywords: Dynamic games; Auctions; Jump bids; Dominance; Inference (search for similar items in EconPapers)
JEL-codes: C57 D44 G21 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:223:y:2021:i:2:p:376-400

DOI: 10.1016/j.jeconom.2019.11.009

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