The Bidder Exclusion Effect

August 2015
Dominic Coey, Bradley Larsen, Kane Sweeney

We introduce a simple and robust approach to address two key questions in empirical auction analysis: discriminating between models of entry and quantifying the revenue gains from improving auction design. The approach builds on Bulow and Klemperer (1996), connecting their theoretical results to empirical analysis. It applies in a broad range of information settings and auction formats without requiring instruments or estimation of a complex structural model. We demonstrate the approach using US timber and used-car auction data.