Set-Asides and Subsidies in Auctions / Susan Athey, Dominic Coey, Jonathan Levin.

Format:

Book

Author/Creator:

Athey, Susan.

Contributor:

National Bureau of Economic Research.

Coey, Dominic.

Levin, Jonathan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16851.

NBER working paper series no. w16851

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

Set-asides and subsidies are used extensively in government procurement and natural resource sales. We analyze these policies in an empirical model of U.S. Forest Service timber auctions. The model fits the data well both within the sample of unrestricted sales where we estimate the model, and when we predict (out of sample) bidder entry and prices for small business set-asides. Our estimates suggest that restricting entry to small businesses substantially reduces efficiency and revenue, although it does increase small business participation. An alternative policy of subsidizing small bidders would increase revenue and small bidder profit, while eliminating almost all of the efficiency loss of set-asides, and only slightly decreasing the profit of larger firms. We explain these findings by connecting to the theory of optimal auction design.

Notes:

Print version record

March 2011.