What Model for Entry in First-Price Auctions? A Nonparametric Approach

Abstract

We develop a nonparametric approach that allows for discrimination among alternative models of entry in first-price auctions. Three models of entry are considered: those of Levin and Smith (1994), Samuelson (1985), and a new model in which the information received at the entry stage is imperfectly correlated with bidder valuations. We derive testable restrictions of these models based on how the pro-competitive selection effect shifts bidder valuation quantiles in response to an increase in the number of potential bidders.

Keywords: First-price auctions, models of entry, selective entry, selection effect, nonparametric estimation, quantiles

JEL Classification: C12, C14, D44