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American Economic Journal: Microeconomics: Vol. 5 No. 1 (February 2013)

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Set-Asides and Subsidies in Auctions

Article Citation

Athey, Susan, Dominic Coey, and Jonathan Levin. 2013. "Set-Asides and Subsidies in Auctions." American Economic Journal: Microeconomics, 5(1): 1-27.

DOI: 10.1257/mic.5.1.1

Abstract

Set-asides and subsidies are used extensively in government procurement and resource sales. We analyze these policies in an empirical model of US Forest Service timber auctions. The model fits the data well both within the sample of unrestricted sales used for estimation, and when we predict (out-of-sample) outcomes for small business set-asides. Our estimates suggest that restricting entry substantially reduces efficiency and revenue, although it increases small business participation. An alternative policy of subsidizing small bidders would increase revenue and small bidder profit, with little efficiency cost. We explain these findings by connecting to the theory of optimal auction design. (JEL D44, H57, L73, Q23)

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Authors

Athey, Susan (Stanford U)
Coey, Dominic (Stanford U)
Levin, Jonathan (Stanford U)

JEL Classifications

D44: Auctions
H57: National Government Expenditures and Related Policies: Procurement
L73: Forest Products
Q23: Renewable Resources and Conservation: Forestry

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American Economic Journal: Microeconomics


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