Identification and Inference in Ascending Auctions With Correlated Private Values

We introduce and apply a new nonparametric approach to identification and inference on data from ascending auctions. We exploit variation in the number of bidders across auctions to nonparametrically identify useful bounds on seller profit and bidder surplus using a general model of correlated private values that nests the standard independent private values (IPV) model. We also translate our identified bounds into closed form and asymptotically valid confidence intervals for several economic measures of interest. Applying our methods to much studied U.S. Forest Service timber auctions, we find evidence of correlation among values after controlling for a rich vector of relevant auction covariates; this correlation causes expected profit, the profit-maximizing reserve price, and bidder surplus to be substantially lower than conventional (IPV) analysis of the data would suggest.