Lectures on Auction Empirics, Collusion and Bidding Rings:

Introduction

John Asker∗

November 29, 2013

This mini-course will review current methods in the empirical study of auction data, with a

focus on it’s application to questions of coordinated bidding behavior (bidding rings, cartels and

collusion). The first session will discuss empirical methods focusing on recent structural econometric

tools. The second and third sessions will examine the application of these tools to the study of

collusive bidding. The underlying focus will be on frameworks for understanding where open

questions lie and ways to address them. Questions of cartel detection and damage assessment,

being intertwined with this objective, will also be addressed.

This involves two things: giving a sense of the technical side of the empirical auction litera-

ture, and giving a sense of the literature on collusion in auctions, from an empirical perspective.

Inevitably this will mean that I leave a lot of stuff out. But what I hope to do is give you enough

to be an thematically informed and critical reader of the literature. The structure of these lectures

will be as follows:

1. Introduction

2. Reduced form auction empirical work

3. Structural empirical work on auctions [This will be the most technical part]

4. Overview of Competition Law and Bidding Rings

5. Detection of collusion in auctions and damage assessment

6. Other issues

In what follows I will give a somewhat selective reading list, by section. Most likely I will cover

some papers not here, and skip others, but the hope is that this list serves as a useful reference.

∗Leonard N. Stern School of Business, NYU. Email: jasker@stern.nyu.edu, Office: KMC 7-79, www.johnasker.com

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The references that I consider particularly useful are starred. All the lecture notes I use will be

posted on my website: http://www.johnasker.com/IO.html

1. Introduction

• *Robert Marshall and Leslie Marx (2013), The Economics of Collusion,

2. Reduced form auction empirical work

• *Hendricks, Ken, Rob Porter (1988), An Empirical Study of An Auction with Asym-

metric Information, American Economic Review, 865

• Hendricks, Ken, Rob Porter and Charles Wilson (1994), Auctions for Oil and Gas Leases

with an Informed Bidder and a Random Reservation Price Econometrica, Vol. 62, No.

6, 1415-1444

3. Structural empirical work on auctions [This will be the most technical part]

• Asker, John (2010), A Study of the Internal Organization of a Bidding Cartel, American

Economic Review

• Athey, Susan and Phillip Haile (2005), Nonparametric Approaches to Auctions, Yale

Working Paper (now in Handbook of Econometrics Vol 6A, I think) http://www.econ.yale.edu/˜pah29/hbk.pdf

• *Guerre, Emmanuel, Isabelle Perrigne, and Quang Vuong (2000), Optimal Nonparamet-

ric Estimation of FIrst-Price Auctions, Econometrica, Vol. 68(3), 525-574

• Haile, Philip and Eli Tamer (2003), Inference with an Incomplete Model of English

Auctions, Journal of Political Economy, 2003, vol. 111, no. 1, 1-51

• Krasnokutsaya, Elena (2011) Identification and Estimation of Auction Models with Un-

observed Heterogeneity, Review of Economic Studies

• Krasnokutsaya, Elena and Katja Seim (2012) Bid Preference Programs and Participation

in Highway Procurement Auctions, American Economic Review

• Li and Vong (1998), Nonparametric Estimation of the Measurement Error Model Using

Multiple Indicators, Journal of Multivariate Analysis 65, 139-165

• Pagan and Ullah, Nonparametric Econometrics.

4. Overview of Competition Law and Bidding Rings

• Asker, John (2010) Leniency and post-cartel market conduct: Preliminary evidence from

parcel tanker shipping, International Journal of Industrial Organization 28 407-414

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• Bajari, Pat and Jungwon Yeo (2008) Auction Design and Tacit Collusion in FCC Spec-

trum Auctions, U. Minnesota Working Paper

• Bork, Robert (1978), The Antitrust Paradox,

• Graham, Dan, Robert Marshall and Jean-Francoise Richard (1990), Differential Pay-

ments Within a Bidder Coalition and the Shapley Value, American Economic Review

80(3), 493-510

• *McAfee, Preston and John McMillian (1992) , Bidding Rings, American Economic

Review, 82(3), 579-599

• Posner, Richard 2001, Antitrust Law, U. Chicago Press.

5. Detection of collusion in auctions

• Athey, Susan, Jon Levin and Enrique Seira (2011) Comparing Open and Sealed Bid

Auctions: Evidence From Timber Auctions, The Quarterly Journal of Economics, 126,

207257

• Bajari, Patrick and Lixin Ye (2003), Deciding Between Competition and Collusion, The

Review of Economics and Statistics, 85(4): 971989

• Baldwin, Laura, Robert C. Marshall and Jean-Francois Richard (1997) Bidder Collusion

at Forest Service Timber Sales, Journal of Political Economy 105(4) 657

• *Porter, Rob and Douglas Zona (1993), Detection of Bid Rigging in Procurement Auc-

tions, Journal of Political Economy, 101(3) 518

• Porter, Rob and Douglas Zona (1999), Ohio school milk markets: an analysis of bidding,

RAND Journal of Economics Vol. 30, No. 2, pp. 263-288

6. Damage assessment

• *Asker, John (2010), A Study of the Internal Organization of a Bidding Cartel, American

Economic Review

• American Bar Association, Proving Antitrust Damages

7. Other issues

• *Hendricks, Ken, Robert Porter and Guofu Tan (2008), Bidding rings and the winners

curse, RAND Journal of Economics Vol. 39, No. 4, pp. 10181041

• Roberts, James and Andrew Sweeting (2013) When Should Sellers Use Auctions? Amer-

ican Economic Review 103(5): 18301861

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