Estimating Auctions with Externalities: The Case of USFS Timber Auctions

Joseph Kuehn

The Review of Economics and Statistics, 2019, vol. 101, issue 5, 791-807

Abstract: I introduce an empirical auction model where in addition to the private value that each bidder receives upon winning the auction, losing bidders incur a negative externality that depends on the identity of the rival winner. I show how the externalities and private value distributions can be identified and estimated in such a model. I then apply the model to U.S. Forest Service timber auctions. I find that mill bidders impose significant externalities on one another of between 10% and 22% of the heterogeneous portion of their valuation. This leads the timber tracts to be misallocated in 5.2% of the auctions in my sample.

Date: 2019
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Working Paper: Estimating Auctions with Externalities: The Case of USFS Timber Auctions (2016)
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