Testing affiliation in private-values models of first-price auctions using grid distributions
Luciano I. de Castro, Harry J. Paarsch
The Annals of Applied Statistics · 2010 · Volume 4 · Issue 4
Abstract
Within the private-values paradigm, we construct a tractable empirical model of equilibrium behavior at first-price auctions when bidders’ valuations are potentially dependent, but not necessarily affiliated. We develop a test of affiliation and apply our framework to data from low-price, sealed-bid auctions held by the Department of Transportation in the State of Michigan to procure road-resurfacing services: we do not reject the hypothesis of affiliation in cost signals.
Keywords
affiliation, First-price, MTP2, sealed-bid auctions
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