| This dissertation considers the identification and estimation of first-price auction models, within the private values paradigm, under the presence of unobserved heterogeneity. A dynamic auction model with independent private values is examined in the first chapter and a static auction model with affiliated private values is considered in the second chapter.;I define unobserved heterogeneity as a market-level (or auction-level) factor, that is observed by the bidders, that affects bidders' behavior, but it is not observed by the econometrician. The existence of unobserved heterogeneity creates a problem since the now traditional identification results based on the seminal work of Guerre, Perrigne, and Vuong (2000) fail. I show that both models are nonparametrically identified combining ideas from the control function and measurement error literatures. The identification proofs are constructive and an estimator is presented based on them. In both cases, the estimator requires the estimation of two reduced-form participation equations as a first-step. In the third chapter I present the computational details regarding the estimation of such participation equations in which the structural error takes on discrete values, and the sample may be selected on these unobservables.;As an application of the novel estimation technique developed here, in the first chapter I take the dynamic auction model to highway construction and repair data from California. In the highway procurement market, if firms' marginal costs are intertemporally linked, the pace at which the government releases new projects over time will have an effect on the prices it pays. The application investigates the effects of the American Recovery and Reinvestment Act on equilibrium prices paid by the government for highway construction projects in California. The structural dynamic auction model allows for intertemporal links in firms' marginal costs, project level unobserved heterogeneity, and endogenous participation. I find that the accelerated pace of the Recovery Act projects imposed a sizable toll on procurement prices, especially on the procurement cost of projects not funded by the stimulus money. |
