This paper describes the auction rules and how bidders prepared for the auction. The full history of bidding is presented. Several questions for auction theory are discussed. In the end, the government collected $617 million for ten licenses. The auction was viewed by all as a huge success---an excellent example of bringing economic theory to bear on practical problems of allocating scarce resources.

Abstract—We develop an approach to identify and test for bid rigging in procurement auctions. First, we introduce a general auction model with asymmetric bidders. Second, we study the problem of identi � cation in our model. We state a set of conditions that are both necessary and suf � cient for a distribution of bids to be generated by a model with competitive bidding. Third, we discuss how to elicit a prior distribution over a � rm’s structural cost parameters from industry experts. Given this prior distribution, we use Bayes’s theorem to compare competitive and collusive models of industry equilibrium. Finally, we apply our methodology to a data set of bidding by construction � rms in the Midwest. The techniques we propose are not computationally demanding, use � exible functional forms, and can be programmed using most standard statistical packages. I.

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The accurate assessment of participants’ private information may critically affect policy recommendations in auction markets. In many auction environments estimation of the private information distribution may be complicated by the presence of unobserved heterogeneity. This problem arises when some of the information available to all bidders at the time of the auction is subsequently not observed by the researcher. This paper develops a semi-parametric method that allows a researcher to uncover the distribution of bidders’ private information in a standard First-Price procurement auction when unobserved auction heterogeneity is present. Sufficient identification conditions are derived and a two-stage estimation procedure to recover bidders’ private information is developed. The procedure is applied to data from Michigan highway procurement auctions and compared to the estimation procedures traditionally used in the context of highway procurement auctions. The estimation results suggest that ignoring unobserved auction heterogeneity is likely to result in substantially biased estimates and may lead to erroneous policy recommendations.

We present a practical system for conducting sealed-bid auctions that preserves the secrecy of the bids while providing for verifiable correctness and trustworthiness of the auction. The auctioneer must accept all bids submitted and follow the published rules of the auction. No party receives any useful information about bids before the auction closes and no bidder is able to change or repudiate her 1 bid. Our solution uses Paillier’s homomorphic encryption scheme [25] for zero knowledge proofs of correctness. Only minimal cryptographic technology is required of bidders; instead of employing complex interactive protocols or multi-party computation, the single auctioneer computes optimal auction results and publishes proofs of the results ’ correctness. Any party can check these proofs of correctness via publicly verifiable computations on encrypted bids. The system is illustrated through application to firstprice, uniform-price and second-price auctions, including multiitem auctions. Our empirical results demonstrate the practicality of our method: auctions with hundreds of bidders are within reach of a single PC, while a modest distributed computing network can accommodate auctions with thousands of bids. 1.

This paper proposes an estimation method for a repeated auction game under the presence of capacity constraints. The estimation strategy is computationally simple as it does not require solving for the equilibrium of the game. It uses a two stage approach. In the first stage the distribution of bids conditional on state variables is estimated using data on bids, bidder characteristics, and contract characteristics. In the second stage, an expression of the expected sum of future profits based on the distribution of bids is obtained, and costs are inferred based on the first order condition of optimal bids. We apply the estimation method to repeated highway construction procurement auctions in the state of California between May 1996 and May 1999. In this market, previously won uncompleted contracts reduce the probability of winning further contracts. We quantify the effect of intertemporal constraints on bidders’ costs and on bids. Due to the intertemporal effect and also to bidder asymmetry, the auction can be inefficient. Based on the estimates of costs, we quantify efficiency losses.

The existence of collusion and heterogeneity across firms is known to introduce some asymmetry in bidding games. A major difficulty when considering asymmetric auctions is that the equilibrium strategies are solutions of an intractable system of differential equations. This paper proposes a simple method for estimating asymmetric first-price auctions within the affiliated private values (APV) paradigm. Specifically, we consider two types of bidders and derive the differential equations characterizing the Bayesian Nash equilibrium strategies. We show that these differential equations can be rewritten using the distribution of observed bids.

In reviewing the theoretical and empirical literature on collusion, this paper distills methods for detecting cartels and distinguishing collusion from competition.

early stage with this research. Paul Milgrom, Steve Tadelis and Steve Brenner also provided very useful comments on various parts of this work. Pueo Keffer provided outstanding research assistance. All remaining errors are our own. * * Stanford University Collusion is an agreement among a group of firms, called a cartel, designed to limit competition among the participants. If all firms in the cartel follow the agreement, buyers will face higher prices, giving the cartel members profits above the normal competitive level. State and Federal Statutes have proscribed such agreements to protect consumers from collusive behavior, and