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  3. American Economic Journal: Microeconomics
  4. February 2013
  5. Set-Asides and Subsidies in Auctions

Set-Asides and Subsidies in Auctions

  • Susan Athey
  • Dominic Coey
  • Jonathan Levin
American Economic Journal: Microeconomics
vol. 5, no. 1, February 2013
(pp. 1-27)
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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)

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

Additional Materials

JEL Classification

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