Tuesday, October 28, 2008

NBER working papers on design of partnerships and auctions

Two new NBER papers touch on market design: Hilt and O'Banion discuss the introduction of limited partnerships, and Bajari and Yeo look at how changes in the rules of FCC spectrum auctions changed bidding behavior.

The Limited Partnership in New York, 1822-1853: Partnerships without Kinship
by Eric Hilt, Katharine E. O'Banion - #14412 (DAE LE)


In 1822, New York became the first common-law state to authorize the formation of limited partnerships, and over the ensuing decades, many other states followed. Most prior research has suggested that these statutes were utilized only rarely, but little is known about their
effects. Using newly collected data, this paper analyzes the use of the limited partnership in nineteenth-century New York City. We find that the limited partnership form was adopted by a surprising number of firms, and that limited partnerships had more capital, failed at lower rates, and were less likely to be formed on the basis of kinship ties, compared to ordinary partnerships. The latter differences were not simply due to selection: even though the merchants who invested in limited partnerships were a wealthy and successful elite, their own ordinary partnerships were quite different from their limited partnerships. The results suggest that the limited partnership facilitated investments outside kinship networks, and into the hands of talented young merchants.

Auction Design and Tacit Collusion in FCC Spectrum Auctions by Patrick Bajari, Jungwon Yeo - #14441 (IO)


The Federal Communications Commission (FCC) has used auctions to award spectrum since 1994. During this time period, the FCC has experimented with a variety of auctions rules including click box bidding and anonymous bidding. These rule changes make the actions of bidders less visible during the auction and also limit the set of bids which can be submitted by a bidder during a particular round. Economic theory suggests that tacit collusion may be more difficult as a result. We examine this proposition using data from 4 auctions: the PCS C Block, Auction 35, the Advanced Wireless Service auction and the 700 Mhz auction. We examine the frequency of jump bids, retaliatory bids and straightforward bids across these auctions. While this simple descriptive exercise has a number of limitations, the data suggests that these rule changes did limit firms' ability to tacitly collude.

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