Endogenous Asymmetry and Entry in Sequential Multi-Unit Auctions: Identification and Estimation

This paper analyzes bidding behavior in a multi period multiple unit auction. While bidders are ex ante symmetric, the first period outcome translates the second period game to a game between asymmetric bidders. The first period outcome determines who will be a strong or a weak bidder in the second period. The possibility of future asymmetry thus affects the bidding behavior in the current symmetric environment. This leads to "excessive entry" and "overbidding' in the first period. We characterize the equilibrium in terms of the observed bid distribution and entry behavior. Using this characterization we establish the nonparametric identification of bidders' privately observed signals from bid data. We suggest a three step procdure to estimate the dynamic mixed discrete-continuous choice model. We estimate our model and report the results. Specifically, we found that the federal government is only recovering 25% of the `strong' buyers' willingness to pay.In the wildcat auctions, we found that the bidders are willing to pay 10 % more to take possible future informational advantage