TESTING AFFILIATION IN PRIVATE-VALUES MODELS OF FIRST-PRICE AUCTIONS USING GRID DISTRIBUTIONS

Within the private-values paradigm, we construct a tractable empirical model of equilibrium behaviour at first-price auctions when bidders' valuations are potentially dependent, but not necessarily affiliated. We develop a test of affiliation and apply our framework to data from low-price, sealed-bid auctions held by the Department of Transportation in the State ofMichigan to procure road-resurfacing services: we do not reject the hypothesis of affiliation in cost signals.

[1]  Paul R. Milgrom,et al.  A theory of auctions and competitive bidding , 1982 .

[2]  Luciano I. de Castro,et al.  Grid Distributions to study single object auctions (Preliminary Version.) , 2008 .

[3]  S. E. Fienberg,et al.  Algebraic and Geometric Methods in Statistics: Algebraic geometry of 2×2 contingency tables , 2009 .

[4]  Frank A. Wolak,et al.  The Local Nature of Hypothesis Tests Involving Inequality Constraints in Nonlinear Models , 1991 .

[5]  Harry J. Paarsch,et al.  USING GRID DISTRIBUTIONS TO TEST FOR AFFILIATION IN MODELS OF FIRST-PRICE AUCTIONS WITH PRIVATE VALUES ∗ , 2008 .

[6]  Stephen E. Fienberg,et al.  Positive dependence concepts for ordinal contingency tables , 1990 .

[7]  Luciano I. de Castro,et al.  Affiliation and Dependence in Economic Models , 2009 .

[8]  F. Bartolucci,et al.  A likelihood ratio test for $MTP_2$ within binary variables , 2000 .

[9]  Azeem M. Shaikh,et al.  Inference for identifiable parameters in partially identified econometric models , 2006 .

[10]  Frank A. Wolak,et al.  Local and Global Testing of Linear and Nonlinear Inequality Constraints in Nonlinear Econometric Models , 1989, Econometric Theory.

[11]  Harry J. Paarsch,et al.  Semiparametric Estimation in Models of First-Price, Sealed-Bid Auctions with Affiliation , 2012 .

[12]  Xian Zhou,et al.  Semiparametric Estimation in Transformation Models with Cure Fraction , 2010 .

[13]  Federico A. Bugni.  Bootstrap Inference in Partially Identi…ed Models , 2009 .

[14]  Stephen E. Fienberg,et al.  3 Algebraic geometry of 2 × 2 contingency tables , 2009 .

[15]  Marco Scarsini,et al.  Archimedean copulae and positive dependence , 2005 .

[16]  Luciano I. de Castro,et al.  How to translate results from auctions to procurements , 2010 .

[17]  Quang Vuong,et al.  Conditionally independent private information in OCS wildcat auctions , 2000 .

[18]  Jean-Jacques Laffont,et al.  Structural Analysis of Auction Data , 1996 .

[19]  J. Pinkse,et al.  A consistent nonparametric test of affiliation in auction models , 2010 .

[20]  D. W. Scott,et al.  Multivariate Density Estimation, Theory, Practice and Visualization , 1992 .

[21]  F. Wolak.  Testing inequality constraints in linear econometric models , 1989 .

[22]  C. Genest.  Frank's family of bivariate distributions , 1987 .

[23]  Frank A. Wolak,et al.  An Exact Test for Multiple Inequality and Equality Constraints in the Linear Regression Model , 1987 .

[24]  Tong Li,et al.  Testing for Affiliation in First-Price Auctions Using Entry Behavior , 2010 .

[25]  E. Luciano,et al.  Copula methods in finance , 2004 .

[26]  Franz C. Palm,et al.  Wald Criteria for Jointly Testing Equality and Inequality , 1986 .

[27]  L. I. Castro.  Affiliation, Equilibrium Existence and the Revenue Ranking of Auctions , 2007 .

[28]  Yupana Wiwattanakantang,et al.  Controlling Shareholders and Corporate Value: Evidence from Thailand , 2001 .

[29]  Q. Vuong,et al.  Structural Estimation of the Affliated Private Value Auction Model , 2002 .

[30]  Tong Li.  Econometrics of First-Price Auctions with Binding Reservation Prices , 2000 .

[31]  R. Nelsen.  An Introduction to Copulas , 1998 .