I will present a study (done with Jun Ma of Renmin University of China and Pai Xu of the University of Hong Kong) on the role of the informativeness of bidders’ signals in the selective entry model for first-price auctions. Our main focus is on whether more informative signals may result in higher revenues for the seller. Using a copula-based semiparametric model, we find that the effect of signals’ informativeness is indetermined due to its indirect (i.e. equilibrium) impact on entry. Nevertheless, we can describe conditions under which the seller is likely to benefit from more informative signals. We also discuss semi-parametric identification and estimation of signals’ informativeness and apply the methodology to the highway mowing auction data (from the Texas Department of Transportation) of Li and Zheng (2009). Our results show that in this application, bidders’ signals are moderately informative. However, by making bidders more informed, the cost of procurement can be reduced by about 4%.
This lecture will be delivered in person at LSK 306, and also streamed via Zoom; the link will be included in the emailed seminar announcement. If you do not regularly receive these, please RSVP here to request the announcement for this and other IAM seminars.