Name: Nianqing Liu, School of Economics, Shanghai University of Finance and Economics

Time: March 30th, 1:30-3:00pm

Location: 614 Fanhai Building

Title: Nonparametric Test of Monotonicity of Bidding Strategy in First-price Auctions

Abstract: This paper develops a nonparametric test of monotonicity of bidding strategy in first price auctions. As shown by Guerre, Perrigne, and Vuong (2000), monotonicity of bidding strategy is the essential restriction imposed by the (theoretical) symmetric first price auctions on distribution of bids. Based on the equivalence between monotonicity of bidding strategy and convexity of integrated value quantile of a bidder's strongest competitor, we propose a test statistic measuring a distance of the integrated value quantile of a bidder's strongest competitor from convexity. It only involves in estimation of bid quantile function, and hence avoids smoothing estimation of bid density. Our test with (rescaled) bootstrap critical values is shown to have the correct size asymptotically, to be consistent against all fixed alternatives and to have non-trivial power against root-n local alternatives.