Accounting for Unobserved Heterogeneity in Ascending Auctions

20 Pages Posted: 9 Jan 2021

See all articles by Yao Luo

Yao Luo

University of Toronto - Department of Economics

Ruli Xiao

Indiana University; Indiana University

Date Written: November 18, 2020

Abstract

We study identification of ascending auctions with additively separable auction-level unobserved heterogeneity. Usual deconvolution approaches are inapplicable due to the lack of the highest bid; both unobserved heterogeneity and incomplete bid data contribute to the correlation among observed bids. We propose an identification strategy exploiting "within" independence of unobserved heterogeneity and private value. First, the ratio of two observed order statistics' characteristic functions identifies the private value distribution. Second, standard deconvolution with a known error distribution identifies the unobserved heterogeneity distribution.

Keywords: Deconvolution, Unobserved Heterogeneity, Order Statistics

JEL Classification: C14, D44

Suggested Citation

Luo, Yao and Xiao, Ruli and Xiao, Ruli, Accounting for Unobserved Heterogeneity in Ascending Auctions (November 18, 2020). Available at SSRN: https://ssrn.com/abstract=3733211 or http://dx.doi.org/10.2139/ssrn.3733211

Yao Luo (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S3G7
Canada

Ruli Xiao

Indiana University ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

Indiana University ( email )

100 S Woodlawn Ave
Bloomington, IN 47405
United States

HOME PAGE: http://https://sites.google.com/site/iueconomicsrulixiao/

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