Information and Competition in U.S. Forest Service Timber Auctions / Susan Athey, Jonathan Levin.

Format:

Book

Author/Creator:

Athey, Susan.

Contributor:

National Bureau of Economic Research.

Levin, Jonathan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7185.

NBER working paper series no. w7185

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

This paper studies the bidding behavior of firms in U.S. Forest Service timber auctions in 1976--1990. When conducting timber auctions, the Forest Service publicly announces its estimates of the tract characteristics before the auction, and each bidder additionally has an opportunity to inspect the tract and form its own private estimates. We build a model that incorporates both differential information and the fact that bids placed in timber auctions are multidimensional. The theory predicts that bidders will strategically distort their bids based on their private information, a practice known as 'skewed bidding.' Using a dataset that includes both the public ex ante Forest Service estimates and the ex post realizations of the tract characteristics, we test our model and provide evidence that bidders do possess private information. Our results suggest that private information affects Forest Service revenue and creates allocational inefficiency. Finally, we establish that risk aversion plays an important role in bidding behavior.

Notes:

Print version record

June 1999.