A COMMENT ON COMPETITION AND BIDDING BEHAVIOR - SOME EVIDENCE FROM THE RICE MARKET

In testing agents' responses to increased competition in sealed‐bid first price‐rice auctions, Meyer [1988] makes two erroneous assumptions: (1) that agents know ex ante the number of bidders in the auction, and (2) that firms forecast resale prices with information unavailable at the time of the auction. These two misspecifications are identified and corrected. A probit model provides a forecast of market competition, and agents' bids are modeled as a function of expected competition and factors affecting the value of each rice lot. The bias toward zero in Meyer's estimated coefficient on market competition is reduced. Copyright © 1991, Wiley Blackwell. All rights reserved