9409569 Vuong Auctions are the mechanisms by which many prices in real world markets are formed. Further understanding of auctions can help design more efficient pricing mechanisms and thereby improve society's allocation of resources. In the public policy arena today, auction design questions are of real importance in financial securities markets (auctions of U.S. Treasury bills), the environment (auctions of emission's allowances), and telecommunications (auctions for radio/personal communications spectrum). Despite the importance of auctions and the huge body of theoretical research on auctions, there has been little rigorous empirical research on the economics of auctions because of severe computational difficulties with the structural estimation of auction models. This project builds on recent breakthroughs by the investigator in obtaining computationally tractable methods of identifying, estimating, and testing theoretical auction models within a structural approach. More specifically, the objective of this project is to address the following challenges to structural estimation of auction models on real data: (1) Previous structural analyses have exclusively relied upon some parametric specification of the structural elements of the theoretical auction model. This project develops structural methods that do not require such parametric information; and (2) It is known that economic policy conclusions based on parametric analyses may not be robust to misspecification of the structural elements. The project develops a two-step nonparametric procedure that is not subject to this problem, is quite simple computationally and behaves satisfactorily for sample sizes typically found in auction data sets.
