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Estimating Auctions with Externalities: The Case of USFS Timber Auctions

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  • Kuehn, Joseph

Abstract

This paper studies how bidding strategies and auction outcomes are affected by downstream competition, particularly for USFS timber auctions. This is done by extending the auction estimation literature to a model where outside competition affects bidding behavior in that bidders are then not only concerned with whether they win the auction, but also the identity of the winner if it is not them. Applying the estimation technique to the case of timber auctions, I find that downstream competition in the lumber industry affects the bidding behavior of mill bidders, sometimes leading to the misallocation of timber tracts.

Suggested Citation

  • Kuehn, Joseph, 2016. "Estimating Auctions with Externalities: The Case of USFS Timber Auctions," MPRA Paper 74775, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:74775
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    References listed on IDEAS

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    1. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1999. "Multidimensional Mechanism Design for Auctions with Externalities," Journal of Economic Theory, Elsevier, vol. 85(2), pages 258-293, April.
    2. Philip A. Haile, 2001. "Auctions with Resale Markets: An Application to U.S. Forest Service Timber Sales," American Economic Review, American Economic Association, vol. 91(3), pages 399-427, June.
    3. Philip A. Haile & Han Hong & Matthew Shum, 2003. "Nonparametric Tests for Common Values in First-Price Sealed-Bid Auctions," Cowles Foundation Discussion Papers 1445, Cowles Foundation for Research in Economics, Yale University.
    4. Susan Athey & Jonathan Levin & Enrique Seira, 2011. "Comparing open and Sealed Bid Auctions: Evidence from Timber Auctions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 207-257.
    5. Elena Krasnokutskaya, 2011. "Identification and Estimation of Auction Models with Unobserved Heterogeneity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(1), pages 293-327.
    6. Philip A. Haile & Elie Tamer, 2003. "Inference with an Incomplete Model of English Auctions," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 1-51, February.
    7. Matt Shum & Phil Haile & Han Hong, 2003. "Nonparametric Tests for Common Values in First-Price Auctions," Economics Working Paper Archive 501, The Johns Hopkins University,Department of Economics.
    8. Jingfeng Lu & Isabelle Perrigne, 2008. "Estimating risk aversion from ascending and sealed-bid auctions: the case of timber auction data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(7), pages 871-896.
    9. Yao Luo & Yuanyuan Wan, 2018. "Integrated-Quantile-Based Estimation for First-Price Auction Models," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 36(1), pages 173-180, January.
    10. Philippe Jehiel & Benny Moldovanu, 1996. "Strategic Nonparticipation," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 84-98, Spring.
    11. Gopal Das Varma, 2002. "Standard Auctions with Identity-Dependent Externalities," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 689-708, Winter.
    12. Aryal, Gaurab & Grundl, Serafin & Kim, Dong-Hyuk & Zhu, Yu, 2018. "Empirical relevance of ambiguity in first-price auctions," Journal of Econometrics, Elsevier, vol. 204(2), pages 189-206.
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    More about this item

    Keywords

    auction with externalities; auction estimation; timber auctions;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L73 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Forest Products

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