Friday, October 31, 2014

The Bidder Exclusion Effect

Dominic Coey, Bradley Larsen, and Kane Sweeney explore The Bidder Exclusion Effect.

ABSTRACT: We introduce a simple and robust approach to answering two key questions in empirical auction analysis: discriminating between models of entry and quantifying the revenue gains from improving auction design. The approach builds on Bulow and Klemperer (1996), connecting their theoretical results to empirical work. It applies in a broad range of information settings and auction formats without requiring instruments or estimation of a complex structural model. We demonstrate the approach using US timber and used-car auction data.

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