Nonparametric Identification of First-Price Auctions With Non-Separable Unobserved Heterogeneity

22 Pages Posted: 17 Sep 2010

See all articles by David McAdams

David McAdams

Duke University - Fuqua School of Business

Yingyao Hu

Johns Hopkins University - Department of Economics

Matthew Shum

California Institute of Technology

Date Written: April 8, 2010

Abstract

We propose a novel methodology for nonparametric identification of first-price auction models with independent private values, which allows for one-dimensional auction-specific unobserved heterogeneity, based on recent results from the econometric literature on nonclassical measurement error in Hu and Schennach (2008). Our approach can accommodate a wide variety of applications in which some location of the conditional distribution of bids (e.g. min or max of the support, mean, etc.) is increasing in the unobserved heterogeneity. This includes settings in which the econometrician fails to observe the reserve price, the cost of bidding, the number of bidders, or some factor (“quality”) with a non-linear effect on bidder values.

Suggested Citation

McAdams, David and Hu, Yingyao and Shum, Matthew, Nonparametric Identification of First-Price Auctions With Non-Separable Unobserved Heterogeneity (April 8, 2010). Economic Research Initiatives at Duke (ERID) Working Paper No. 61, Available at SSRN: https://ssrn.com/abstract=1677603 or http://dx.doi.org/10.2139/ssrn.1677603

David McAdams (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Yingyao Hu

Johns Hopkins University - Department of Economics ( email )

3400 Charles Street
Baltimore, MD 21218-2685
United States

Matthew Shum

California Institute of Technology ( email )

Pasadena, CA 91125
United States

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