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Arriving in Time: Estimation of English Auctions With a Stochastic Number of Bidders

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  • José J. Canals-Cerdá
  • Jason Pearcy

Abstract

We develop a new econometric approach for the estimation of second-price ascending-bid auctions with a stochastic number of bidders. Our empirical framework considers the arrival process of new bidders as well as the distribution of bidders' valuations of objects being auctioned. By observing the timing of bidder arrival, the model is identified even when the number of potential bidders is stochastic and unknown. The relevance of our approach is illustrated with an empirical application using a unique dataset of art auctions on eBay. Our results suggest a higher impact of sellers' reputation on bidders' valuations than previously reported in cross-sectional studies but the impact of reputation on bidder arrival is largely insignificant. Interestingly, a seller's reputation impacts not only the actions of the bidders but the actions of the seller as well. In particular, experience and a good reputation increase the probability of a seller posting items for sale on longer-lasting auctions, which we find increases the expected revenue for the seller. Supplementary materials for this article are available online.

Suggested Citation

  • José J. Canals-Cerdá & Jason Pearcy, 2013. "Arriving in Time: Estimation of English Auctions With a Stochastic Number of Bidders," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 31(2), pages 125-135, April.
    • Handle: RePEc:taf:jnlbes:v:31:y:2013:i:2:p:125-135
    DOI: 10.1080/07350015.2012.747825
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    Cited by:

    1. Joachim Freyberger & Bradley J. Larsen, 2022. "Identification in ascending auctions, with an application to digital rights management," Quantitative Economics, Econometric Society, vol. 13(2), pages 505-543, May.
    2. Rui Fang & Xiaohu Li, 2017. "Nonparametric tests for strictly increasing virtual valuations," Journal of Applied Statistics, Taylor & Francis Journals, vol. 44(6), pages 1122-1136, April.
    3. Platt, Brennan C., 2017. "Inferring ascending auction participation from observed bidders," International Journal of Industrial Organization, Elsevier, vol. 54(C), pages 65-88.
    4. Hammond, Robert G., 2013. "A structural model of competing sellers: Auctions and posted prices," European Economic Review, Elsevier, vol. 60(C), pages 52-68.
    5. José Canals-Cerdá, 2012. "The value of a good reputation online: an application to art auctions," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 36(1), pages 67-85, February.

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