Foundations and Trends® in Econometrics > Vol 9 > Issue 2-4

Structural Econometrics of Auctions: A Review

Matthew L. Gentry, London School of Economics and Political Science, UK, M.L.Gentry@LSE.ac.uk Timothy P. Hubbard, Colby College, USA, Timothy.Hubbard@Colby.edu Denis Nekipelov, University of Virginia, USA, dn4w@Virginia.edu Harry J. Paarsch, University of Central Florida, USA, Harry.Paarsch@UCF.edu
 
Suggested Citation
Matthew L. Gentry, Timothy P. Hubbard, Denis Nekipelov and Harry J. Paarsch (2018), "Structural Econometrics of Auctions: A Review", Foundations and TrendsĀ® in Econometrics: Vol. 9: No. 2-4, pp 79-302. http://dx.doi.org/10.1561/0800000031

Published: 26 Apr 2018
© 2018 M. L. Gentry, T. P. Hubbard, D. Nekipelov, and H. J. Paarsch
 
Subjects
Limited dependent variables,  Microeconometrics,  Semiparametric and nonparametric estimation,  Industrial Organization,  Game theory,  Information Systems Economics: Auctions,  Information Systems Economics: E-marketplaces,  Electronic markets, auctions and exchanges
 
Keywords
C57 Econometrics of Games and AuctionsD44 Auctions.
auctionsstructural econometrics
 

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In this article:
1. Introduction and Motivation
2. Theoretical Models
3. Mapping Theory to Observables
4. Identification
5. Two Approaches
6. Estimation Strategies
7. Asymmetries
8. Dependence
9. Multi-Unit and Multi-Object Auctions
10. Summary, Conclusions, and Suggestions
Acknowledgements
Appendices
References

Abstract

We review the literature concerned with the structural econometrics of observational data from auctions, discussing the problems that have been solved and highlighting those that remain unsolved as well as suggesting areas for future research. Where appropriate, we discuss different modeling choices as well as the fragility or robustness of different methods.

DOI:10.1561/0800000031
ISBN: 978-1-68083-446-8
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Table of contents:
1. Introduction and Motivation
2. Theoretical Models
3. Mapping Theory to Observables
4. Identification
5. Two Approaches
6. Estimation Strategies
7. Asymmetries
8. Dependence
9. Multi-Unit and Multi-Object Auctions
10. Summary, Conclusions, and Suggestions
Acknowledgements
Appendices
References

Structural Econometrics of Auctions: A Review

One of the great success stories in economics and game theory during the latter half of the 20th century was the systematic theoretical investigation of incomplete information in different economic environments, including auctions. From an econometrician's perspective, theoretical models of incomplete information are particularly compelling because they provide richer explanations of the observed heterogeneity in data than ones relying on measurement error or productivity shocks. Models of auctions are especially attractive because the rules of an auction govern how the potential buyers must behave during the selling process. Unlike in other economic applications, these rules place incredible structure on the data generating process. In particular, under certain conditions, the twin hypotheses of optimization and equilibrium allow the econometrician to identify the unobserved distribution of valuations from the observed distribution bids. Because the primitives of the economic model are identified, the Lucas critique is circumvented and comparative institutional design, such as comparing outcomes under alternative market institutions not observed in the data, can be undertaken.

Structural Econometrics of Auctions summarizes the structural econometric analysis of observational data from auctions. First developing the necessary economic theory, then mapping this to the data-generating processes, and finally investigating the various estimation strategies. Throughout the review, the authors illustrate the methods using a variety of examples, from timber auctions to eBay auctions and auctions of advertising on the Internet.

 
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