Comparing Open and Sealed Bid Auctions: Theory and Evidence from Timber Auctions

72 Pages Posted: 26 Nov 2004

See all articles by Jonathan Levin

Jonathan Levin

Stanford Graduate School of Business; Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Susan Athey

Stanford Graduate School of Business

Enrique Seira

Stanford University - Department of Economics

Date Written: December 2004

Abstract

We study entry and bidding patterns in sealed bid and open auctions with heterogeneous bidders. Using data from U.S. Forest Service timber auctions, we document a set of systematic effects of auction format: sealed bid auctions attract more small bidders, shift the allocation towards these bidders, and can also generate higher revenue. We propose a model, which extends the theory of private value auctions with heterogeneous bidders to capture participation decisions, that can account for these qualitative effects of auction format. We then calibrate the model using parameters estimated from the data and show that the model can explain the quantitative effects as well. Finally, we use the model to provide an assessment of bidder competitiveness, which has important consequences for auction choice.

Keywords: Auctions, Timber

JEL Classification: Q23, D44

Suggested Citation

Levin, Jonathan D. and Carleton Athey, Susan and Seira, Enrique, Comparing Open and Sealed Bid Auctions: Theory and Evidence from Timber Auctions (December 2004). Available at SSRN: https://ssrn.com/abstract=624443 or http://dx.doi.org/10.2139/ssrn.624443

Jonathan D. Levin (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
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Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Susan Carleton Athey

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Enrique Seira

Stanford University - Department of Economics ( email )

Stanford, CA 94305
United States

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