Estimation in English Auctions with Unobserved Heterogeneity

26 August 2020
Dr. Cristián Hernández

Consultant Dr. Cristián Hernández published “Estimation in English Auctions with Unobserved Heterogeneity” in the Summer 2020 edition of Wiley’s The RAND Journal of Economics. Until recently, empirical literature on English auctions has ignored both correlation and unobserved heterogeneity, resulting in approaches with significant limitations. Dr. Hernández and his co-authors aim to fill this void by proposing a framework for identifying and estimating a private values model with unobserved heterogeneity from bid data in English auctions, using variation in the number of bidders across auctions, and extending the framework settings. Using data from the eBay Motors auctions, the authors illustrate the economic method, finding that unobserved heterogeneity is important and can cause misestimations in welfare measures if ignored.