A Consistent Econometric Test for Bid Interdependence in Repeated Second-Price Auctions with Posted Prices
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In repeated second-price experimental auctions, the winning bid is normally posted after each round. The posting of these winning prices after each round can result in bids submitted in later rounds to be interdependent with posted prices from earlier rounds. Several approaches in the past have tried to scrutinize their experimental data for value interdependence by regressing bids on lagged market prices or lagged bids and ignoring the inherent endogeneity problem. This paper introduces a formal test for bid interdependence in repeated second-price auctions with posted prices using a dynamic panel model. We then apply this test to formally check the presence of bid interdependence in three datasets used in previous studies.
KeywordsExperimental auctions Bid interdependence Dynamic panel estimator Second-price auction
JELB4 D8 C23
We are grateful to Glenn Harrison, Jay Corrigan and Jayson Lusk for helpful feedback. We also thank Jay Corrigan and Jayson Lusk for providing us the data from their experiments.
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