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Preferences and Performance in Simultaneous First-Price Auctions: A Structural Analysis

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  • Matthew Gentry
  • Tatiana Komarova
  • Pasquale Schiraldi

Abstract

Motivated by the prevalence of simultaneous bidding across a wide range of auction markets, we develop and estimate a model of strategic interaction in simultaneous first-price auctions when objects are heterogeneous and bidders have non-additive preferences over combinations. We establish non-parametric identification of primitives in this model under standard exclusion restrictions, providing a basis for both estimation and testing of preferences over combinations. We then apply our model to data on Michigan Department of Transportation (MDOT) highway procurement auctions, quantifying the magnitude of cost synergies and evaluating the performance of the simultaneous first-price mechanism in the MDOT marketplace.

Suggested Citation

  • Matthew Gentry & Tatiana Komarova & Pasquale Schiraldi, 2023. "Preferences and Performance in Simultaneous First-Price Auctions: A Structural Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(2), pages 852-878.
    • Handle: RePEc:oup:restud:v:90:y:2023:i:2:p:852-878.
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    File URL: http://hdl.handle.net/10.1093/restud/rdac030
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    References listed on IDEAS

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    1. Joachim R. Groeger, 2014. "A Study Of Participation In Dynamic Auctions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 1129-1154, November.
    2. Anders Lunander & Sofia Lundberg, 2013. "Bids And Costs In Combinatorial And Noncombinatorial Procurement Auctions—Evidence From Procurement Of Public Cleaning Contracts," Contemporary Economic Policy, Western Economic Association International, vol. 31(4), pages 733-745, October.
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    4. Joachim R. Groeger, 2014. "A Study Of Participation In Dynamic Auctions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(4), pages 1129-1154, November.
    5. Véronique Flambard & Isabelle Perrigne, 2006. "Asymmetry in Procurement Auctions: Evidence from Snow Removal Contracts," Economic Journal, Royal Economic Society, vol. 116(514), pages 1014-1036, October.
    6. Diego Moreno & John Wooders, 2011. "Auctions with heterogeneous entry costs," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 313-336, June.
    7. Ali Hortaçsu & David McAdams, 2010. "Mechanism Choice and Strategic Bidding in Divisible Good Auctions: An Empirical Analysis of the Turkish Treasury Auction Market," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 833-865.
    8. Andres Aradillas-Lopez & Bo E. Honoré & James L. Powell, 2007. "Pairwise Difference Estimation With Nonparametric Control Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1119-1158, November.
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