Identification in the Roy Model with an Application to Auctions

Abstract

The paper presents conditions for non-parametric identification of a joint distribution when the marginal distributions are identified and the joint distribution is partially identified. Specifically, the paper considers the problem of estimating a J-dimensional Roy Model and shows that the joint distribution is identified up to an approximation. The paper extends Heckman and Honore (1990) by providing an additional identification result with reasonable data requirements and without strong parametric assumptions. The result is applied to private value sealed bid auctions where bidders face competing auctions for substitutes, such as in auction platforms like eBay or Google Adwords.

Keywords: auctions, roy model, identification, selection effect

JEL Classification: C14, D44