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157
Estimating dynamic models of imperfect competition
, 2007
"... We describe a twostep algorithm for estimating dynamic games under the assumption that behavior is consistent with Markov perfect equilibrium. In the first step, the policy functions and the law of motion for the state variables are estimated. In the second step, the remaining structural parameters ..."
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Cited by 279 (17 self)
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We describe a twostep algorithm for estimating dynamic games under the assumption that behavior is consistent with Markov perfect equilibrium. In the first step, the policy functions and the law of motion for the state variables are estimated. In the second step, the remaining structural parameters are estimated using the optimality conditions for equilibrium. The second step estimator is a simple simulated minimum distance estimator. The algorithm applies to a broad class of models, including industry competition models with both discrete and continuous controls such as the Ericson and Pakes (1995) model. We test the algorithm on a class of dynamic discrete choice models with normally distributed errors and a class of dynamic oligopoly models similar to that of Pakes and McGuire (1994).
Nonparametric Tests for Common Values in FirstPrice SealedBid Auctions
, 2003
"... We develop tests for common values at firstprice sealedbid auctions. Our tests are nonparametric, require observation only of the bids submitted at each auction, and are based on the fact that the “winner’s curse” arises only in common values auctions. The tests build on recently developed methods ..."
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Cited by 104 (13 self)
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We develop tests for common values at firstprice sealedbid auctions. Our tests are nonparametric, require observation only of the bids submitted at each auction, and are based on the fact that the “winner’s curse” arises only in common values auctions. The tests build on recently developed methods for using observed bids to estimate each bidder’s conditional expectation of the value of winning the auction. Equilibrium behavior implies that in a private values auction these expectations are invariant to the number of opponents each bidder faces, while with common values they are decreasing in the number of opponents. This distinction forms the basis of our tests. We consider both exogenous and endogenous variation in the number of bidders. Monte Carlo experiments show that our tests can perform well in samples of moderate sizes. We apply our tests to two different types of U.S. Forest Service timber auctions. For unitprice (“scaled”) sales often argued to fit a private values model, our tests consistently fail to find evidence of common values. For “lumpsum” sales, where aprioriarguments for common values appear stronger, our tests yield mixed evidence against the private values hypothesis.
Demand Estimation with Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach
, 2005
"... We reconsider the identification and estimation of GormanLancasterstyle hedonic models of demand for differentiated products in the spirit of Sherwin Rosen. We generalize Rosen’s first stage to account for product characteristics that are not observed and to allow the hedonic pricing function to ha ..."
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Cited by 98 (1 self)
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We reconsider the identification and estimation of GormanLancasterstyle hedonic models of demand for differentiated products in the spirit of Sherwin Rosen. We generalize Rosen’s first stage to account for product characteristics that are not observed and to allow the hedonic pricing function to have a general nonseparable form. We take an alternative semiparametric approach to Rosen’s second stage in which we assume that the parametric form of utility is known, but we place no restrictions on the aggregate distribution of utility parameters. If there are only a small number of products, we show how to construct bounds on individuals’ utility parameters, as well as other economic objects such as aggregate demand and consumer surplus. We apply our methods to estimating the demand for personal computers.
Mechanism Choice and Strategic Bidding in Divisible Good Auctions: An Empirical Analysis of the Turkish Treasury Auction Market
, 2002
"... ..."
Identification of Standard Auction Models
, 2001
"... We present new identification results for models of firstprice, secondprice, ascending (English), and descending (Dutch) auctions. We analyze a general specification of the latent demand and information structure, nesting as special cases the pure private values and pure common values models, and ..."
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Cited by 63 (6 self)
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We present new identification results for models of firstprice, secondprice, ascending (English), and descending (Dutch) auctions. We analyze a general specification of the latent demand and information structure, nesting as special cases the pure private values and pure common values models, and allowing both ex ante symmetric and asymmetric bidders. We address identification of a series of nested models and derive testable restrictions that enable discrimination between models on the basis of observed data. The simplest model–that of symmetric independent private values–is nonparametrically identified even if only the transaction price from each auction is observed. For more complex models, identification and testable restrictions are obtained when additional information of one or more of the following types is available: (i) the identity of the winning bidder or other bidders, (ii) one or more bids in addition to the transaction price; (iii) exogenous variation in the number of bidders; (iv) bidderspecific covariates; (v) auctionspecific covariates. While many private values (PV) models are nonparametrically
Structural Econometric Modeling: Rationales and Examples from Industrial Organization
 Julio J. Rotemberg and
, 2005
"... This chapter explains the logic of structural econometric models and compares them to other types of econometric models. We provide a framework researchers can use to develop and evaluate structural econometric models. This framework pays particular attention to describing different sources of unobs ..."
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Cited by 52 (2 self)
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This chapter explains the logic of structural econometric models and compares them to other types of econometric models. We provide a framework researchers can use to develop and evaluate structural econometric models. This framework pays particular attention to describing different sources of unobservables in structural models. We use our framework to evaluate several literatures in industrial organization economics, including the literatures dealing with market power, product differentiation, auctions, regulation and entry.
Discrete Bids and Empirical Inference in Divisible Good Auctions
, 2006
"... I examine a model of a uniform price auction of a perfectly divisible good with private information in which the bidders submit discrete bidpoints, and hence step functions, rather than continuous downward sloping demand functions. I characterize necessary conditions for equilibrium bidding. The cha ..."
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Cited by 37 (9 self)
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I examine a model of a uniform price auction of a perfectly divisible good with private information in which the bidders submit discrete bidpoints, and hence step functions, rather than continuous downward sloping demand functions. I characterize necessary conditions for equilibrium bidding. The characterization result reveals a close relationship between bidding in multiunit auctions and oligopolistic behavior. I demonstrate that an indirect approach to the revenue comparisons of discriminatory and uniform price auctions is not valid if bid functions have steps. In particular, bidders may bid above their marginal valuation in a uniform price auction. I also use the necessary conditions for structural estimation. I examine a dataset consisting of individual bids in uniform price treasury auctions of the Czech government. I propose an alternative method for evaluating the performance of the employed mechanism. My results suggest that the uniform price auction performs well, both in terms of efficiency of the allocation and in terms of revenue maximization. I estimate that the employed mechanism failed to extract at most 0.03 % (in terms of the annual yield of Tbills) worth of expected surplus while implementing an allocation resulting in almost all of the efficient surplus.
Comparing open and sealed bid auctions: theory and evidence from timber auctions. Working paper
, 2005
"... 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 e¤ects of auction format: sealed bid auctions attract more small bidders, shift the allocation towards these bidders, a ..."
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Cited by 34 (4 self)
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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 e¤ects 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 qualititive e¤ects of auction format. We then calibrate the model using parameters estimated from the data and show that the model can explain the quantitative e¤ects as well. Finally, we use the model to provide an assessment of bidder competitiveness, which has important consequences for auction choice. We thank Phil Haile, Guido Imbens, Richard Levin, Paul Milgrom, and Ilya Segal for helpful suggestions, and Jerry Hausman for advice at the early stages of this project. We are especially grateful to Rob Porter for providing detailed and insightful comments on an earlier draft of the
Intersection Bounds: Estimation and Inference
, 2010
"... We develop a practical and novel method for inference on intersection bounds, namely bounds defined by either the infimum or supremum of a parametric or nonparametric function, or equivalently, the value of a linear programming problem with a potentially infinite constraint set. Our approach is es ..."
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Cited by 27 (10 self)
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We develop a practical and novel method for inference on intersection bounds, namely bounds defined by either the infimum or supremum of a parametric or nonparametric function, or equivalently, the value of a linear programming problem with a potentially infinite constraint set. Our approach is especially convenient in models comprised of a continuum of inequalities that are separable in parameters, and also applies to models with inequalities that are nonseparable in parameters. Since analog estimators for intersection bounds can be severely biased in finite samples, routinely underestimating the length of the identified set, we also offer a (downward/upward) median unbiased estimator of these (upper/lower) bounds as a natural byproduct of our inferential procedure. Furthermore, our method appears to be the first and currently only method for inference in nonparametric models with a continuum of inequalities. We develop asymptotic theory for our method based on the strong approximation of a sequence of studentized empirical processes by a sequence of Gaussian or other pivotal processes. We provide conditions for the use of nonparametric kernel and series estimators, including a novel result that establishes strong approximation for general series estimators, which may be of independent interest. We illustrate the usefulness of our method with Monte Carlo experiments and an empirical example.