“Using Grid Distributions to Test for Affiliation in Models of First-Price Auctions with Private Values” by Harry J. Paarsch
Harry J. Paarsch
University of Melbourne
Luciano I. de Castro
University of Illinois
Within the private-values paradigm, we construct a tractable empirical model of equilibrium behaviour at first-price auctions when bidders' valuations are potentially dependent, but not necessarily affiliated. We develop a test of affiliation and apply our framework to data from low-price, sealed-bid auctions held by the Department of Transportation in the State of Michigan to procure road-resurfacing services: we do not reject the hypothesis of affiliation in cost signals.