NBER Working Papers and Publications
|September 2018||Dynamics and Efficiency in Decentralized Online Auction Markets|
with Alan Sorensen: w25002
Economic theory suggests that decentralized markets can achieve efficient outcomes if buyers and sellers have many opportunities to trade. We examine this idea empirically by developing a tractable dynamic model of bidding in an overlapping, sequential auction environment and estimating the model with detailed data from eBay. Bidders in the model discount their bids to reflect the option value of losing – if they lose, they can come back to try again – and the structure of the model makes it so they effectively bid against a stationary distribution of rivals. We find that dynamic participation makes the market meaningfully more efficient than a benchmark in which buyers have only one opportunity to bid, but the observed outcomes still fall well short of the fully efficient competitive equi...
|May 2006||Information Spillovers in the Market for Recorded Music|
with Alan Sorensen: w12263
This paper studies the role of consumer learning in the demand for recorded music by examining the impact of an artist%u2019s new album on sales of past and future albums. Using detailed album sales data for a sample of 355 artists, we show that the release of a new album increases sales of old albums, and the increase is substantial and permanent%u2014especially if the new release is a hit. Various patterns in the data suggest the source of the spillover is information: a new release causes some uninformed consumers to learn about their preferences for the artist%u2019s past albums. These information spillovers suggest that the high concentration of success across artists may partly result from a lack of information, and they have significant implications for investment and the structure ...
|July 2003||Bidding Rings and the Winner's Curse: The Case of Federal Offshore Oil and Gas Lease Auctions|
with Robert Porter, Guofu Tan: w9836
This paper extends the theory of legal cartels to affiliated private value and common value environments, and applies the theory to explain joint bidding patterns in U.S. federal government offshore oil and gas lease auctions. We show that efficient collusion is always possible in private value environments, but may not be in common value environments. In the latter case, fear of the winner's curse can cause bidders not to bid, which leads to inefficient trade. Buyers with high signals may be better off if no one colludes. The bid data is consistent with oil and gas leases being common value assets, and with the prediction that the winner's curse can prevent rings from forming on marginal tracts.
Published: Hendricks, Ken, Robert Porter, and Guofu Tan. “Bidding Rings and the Winner’s Curse." RAND Journal of Economics 39, 4 (Winter 2008): 1018-1041.