Identification of first-price auctions with non-separable unobserved heterogeneity

Published

Journal Article

We propose a novel methodology for identification of first-price auctions, when bidders' private valuations are independent conditional on one-dimensional unobserved heterogeneity. We extend the existing literature (Li and Vuong, 1998; Krasnokutskaya, 2011) by allowing the unobserved heterogeneity to be non-separable from bidders' valuations. Our central identifying assumption is that the distribution of bidder values is increasing in the state. When the state-space is finite, such monotonicity implies the full-rank condition needed for identification. Further, we extend our approach to the conditionally independent private values model of Li et al. (2000), as well as to unobserved heterogeneity settings in which the implicit reserve price or the cost of bidding varies across auctions. © 2013 Elsevier B.V. All rights reserved.

Full Text

Duke Authors

Cited Authors

  • Hu, Y; McAdams, D; Shum, M

Published Date

  • January 1, 2013

Published In

Volume / Issue

  • 174 / 2

Start / End Page

  • 186 - 193

International Standard Serial Number (ISSN)

  • 0304-4076

Digital Object Identifier (DOI)

  • 10.1016/j.jeconom.2013.02.005

Citation Source

  • Scopus