Information and Competition in U.S. Forest Service Timber Auctions

52 Pages Posted: 25 Aug 1999 Last revised: 19 Feb 2021

See all articles by Susan Athey

Susan Athey

Stanford Graduate School of Business

Jonathan Levin

Stanford Graduate School of Business; Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 1999

Abstract

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.

Suggested Citation

Carleton Athey, Susan and Levin, Jonathan D., Information and Competition in U.S. Forest Service Timber Auctions (June 1999). NBER Working Paper No. w7185, Available at SSRN: https://ssrn.com/abstract=171410

Susan Carleton Athey (Contact Author)

Stanford Graduate School of Business ( email )

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Jonathan D. Levin

Stanford Graduate School of Business ( email )

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Stanford University - Department of Economics ( email )

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