Progressive and Discrete Auctions a Finite Sample Evaluation Based on Dominated Strategies.pdf

Progressive and Discrete Auctions a Finite Sample Evaluation Based on Dominated Strategies Frdric JouneauSion Olivier Torrs GREMARS Universit de Lil le and CORE Universit Catholique de Louvain GREMARS Universit de Lil le This version February First version January Abstract We prop ose an econometric evaluation for progressive auctions with discrete increments Although very common in practice this kind of mechanism raises many theoretical diculties First there is no closed form equilibri um strategies Thus the econometrician cannot rely on a single formula to build a mo del Second the discrete nature of the outcome complicates the inference Moreover meaningful statistical evaluation of such auction mo dels can only b e achieved using exact nite sample inference techniques Our econometric mo del is built on the weak assumption that the observed bids path has not b een drawn from some given dominated strategies This implies that our results remain valid for many kinds of equilibriu m concepts The sp ecication of our mo del allows the computation of a Maximum Likeliho o d Estimator Usual asymptotic tests and condence regions derived from the likelih o o d function are not very reliable A new exact inference metho d prop osed by Dufour is implemented to circumvent this diculty The pro cedure is applied to an auction in which travel agents bid to discount airline tickets