Econometrics of Share Auctions

Abstract

The purpose of this paper is to propose structural econometric methods for the empirical study of Wilson’s (1979) share auction model. This is a common value model in which a single and perfectly divisible good is sold to a group of symmetric and risk-neutral buyers. The parameters in the distribution function of the value of the good and the signals received by the buyers are estimated using a two-step estimation procedure. The methods are applied to French Treasury securities auctions held in 1995. A counterfactual comparison shows that the Treasury’s revenue in the discriminatory share auction (the mechanism adopted by the French Treasury) is 5% higher than in the uniform share auction. ∗We thank the referees and the co-editor for their careful reading and insightful suggestions. We also thank George Deltas, Jean-Pierre Florens, Emmanuel Guerre, Cheng Hsiao, Michael Landsberger, Thierry Magnac, Isabelle Perrigne, Quang Vuong, and participants at the Journees Doctorales de Paris (November 2000), the Econometrics seminar of Toulouse University, the 2001 North American Summer Meetings of the Econometric Society, and the Empirical Economics Workshop at the University of Chicago, for their helpful remarks. Finally thanks to Sebastien Moynot and Benoit Cœre of the French Treasury for sharing their data with us and for helping us to understand the institutional aspects of the Treasury auctions in France. †Department of Economics, University of Chicago, 1126 E. 59th Street, Chicago, IL 60637, USA, and CREST, 28 rue des Saints Peres, 75007 Paris, France. Email: [e-mail] ‡INRA, 14 rue Girardet, 54042 Nancy, France. Email: [e-mail]. §INRA, 65 boulevard de Brandebourg, 94205 Ivry cedex, France. Email: [e-mail].