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Arriving in Time: Estimation of English Auctions with a Stochastic Number of Bidders

26 Pages Posted: 1 Dec 2006 Last revised: 9 May 2014

José J. Canals-Cerda

Federal Reserve Bank of Philadelphia

Jason Pearcy

Montana State University - Bozeman - Department of Agricultural Economics and Economics

Date Written: October 29, 2012

Abstract

We develop a new econometric approach for estimation of second-price ascending-bid auctions with a stochastic number of bidders. Our empirical framework considers the arrival process of new bidders as well as the distribution of bidders’ valuations of objects being auctioned. By observing the timing of bidder arrival the model is identified even when the number of potential bidders is stochastic and unknown. The relevance of our approach is illustrated with an empirical application using a unique dataset of art auctions on eBay. Our results suggest a higher impact of sellers’ reputation on bidders’ valuations than previously reported in cross-sectional studies but the impact of reputation on bidder arrival is largely insignificant. Interestingly, a seller’s reputation impacts not only the actions of the bidders but the actions of the seller as well. In particular, experience and a good reputation increase the probability of a seller posting items for sale on longer-lasting auctions which we find increases the expected revenue for the seller.

Keywords: English Auctions, Internet markets, Structural estimation

JEL Classification: C51, C72, D44, L11, L14

Suggested Citation

Canals-Cerda, José J. and Pearcy, Jason, Arriving in Time: Estimation of English Auctions with a Stochastic Number of Bidders (October 29, 2012). Journal of Business & Economic Statistics, Vol. 31, No. 2, pp. 125-135, April 2013. Available at SSRN: https://ssrn.com/abstract=947605 or http://dx.doi.org/10.2139/ssrn.947605

José J. Canals-Cerda (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
(215) 574-4127 (Phone)
(215) 574-4146 (Fax)

Jason Pearcy

Montana State University - Bozeman - Department of Agricultural Economics and Economics ( email )

Bozeman, MT 59717-2920
United States

HOME PAGE: http://www.montana.edu/jpearcy/

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