TY  - JOUR
AU  - Haile,Philip A.
AU  - Hong,Han
AU  - Shum,Matthew
TI  - Nonparametric Tests for Common Values at First-Price Sealed-Bid Auctions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10105
PY  - 2003
Y2  - November 2003
UR  - http://www.nber.org/papers/w10105
L1  - http://www.nber.org/papers/w10105.pdf
N1  - Author contact info:
Philip Haile
Department of Economics
Yale University
37 Hillhouse Avenue
P.O. Box 208264
New Haven, CT  06520
Tel: 203/432-3568
Fax: 203/432-6323
E-Mail: philip.haile@yale.edu

Han Hong
Landau Economics Building
579 Serra Mall
Stanford, CA 94305
E-Mail: doubleh@stanford.edu

Matthew Shum
California Institute of Technology
E-Mail: mshum@caltech.edu
AB  - We develop tests for common values at first-price sealed-bid auctions. Our tests are nonparametric, require observation only of the bids submitted at each auction, and are based on the fact that the  winner's curse' arises only in common values auctions. The tests build on recently developed methods for using observed bids to estimate each bidder's conditional expectation of the value of winning the auction. Equilibrium behavior implies that in a private values auction these expectations are invariant to the number of opponents each bidder faces, while with common values they are decreasing in the number of opponents. This distinction forms the basis of our tests. We consider both exogenous and endogenous variation in the number of bidders. Monte Carlo experiments show that our tests can perform well in samples of moderate sizes. We apply our tests to two different types of U.S. Forest Service timber auctions. For unit-price ( scaled') sales often argued to fit a private values model, our tests consistently fail to find evidence of common values. For lumpsum' sales, where a priori arguments for common values appear stronger, our tests yield mixed evidence against the private values hypothesis.
ER  -