COMMENTS WELCOME
Contact: brent-hickman@uiowa.edu
WORKING PAPERS:
EFFORT, RACE GAPS AND AFFIRMATIVE ACTION: A GAME-THEORETIC ANALYSIS OF COLLEGE ADMISSIONS (Job Market Paper, Part I)
A preliminary draft of the paper can be downloaded by clicking on the title.
ABSTRACT: I construct a strategic model of incomplete information where many heterogeneous
students compete for seats at colleges and universities of varying prestige. I argue that the model
is strategically equivalent to an all-pay auction where agents differ with respect to their cost of
bidding. Using tools from auction theory, I characterize equilibrium behavior by deriving a set
of equations that approximate equilibrium strategies when the number of players is large. I use
the model to analyze the effects of Affirmative Action policies on effort choice and achievement
gaps. I also compare the performance of two common implementations of Affirmative Action:
quotas and admission preferences. I show that these policies have very different effects on effort,
achievement gaps, and allocation of college admissions in equilibrium. The model suggests that
admissions preferences (such as those previously used in undergraduate admissions at the University
of Michigan) are unambiguously bad for effort choice, and ineffective as an allocational mechanism.
These findings differ from those of previous theoretical work on Affirmative Action. Quotas seem to
perform better than admissions preferences, with some positive and some negative effects on effort
and achievement gaps. Both policies widen the achievement gap among the best and brightest
students.
EFFORT, RACE GAPS AND AFFIRMATIVE ACTION: A SEMIPARAMETRIC STRUCTURAL POLICY ANALYSIS OF US COLLEGE ADMISSIONS (Job Market Paper, Part II)
A preliminary draft of the paper can be downloaded by clicking on the title.
ABSTRACT: Using the college admissions model of Hickman (2009), I perform an empirical policy analysis of Affirmative Action (AA) in US college admissions. I use data on American colleges, freshman admissions and college entrance test scores
to recover the AA policy implied by the data. Then I semiparametrically estimate the distributions
over student heterogeneity. With estimates of the structural elements of the model in hand,
I perform a set of counterfactual experiments to compare the effects of the status quo policy with
alternatives not observed in the data: color-blind admissions and quotas. Each is evaluated in terms
of (i) academic performance effects, (ii) the academic racial achievement gap, and (iii) the college
enrollment gap. The empirical model suggests that a color-blind rule and the status-quo policy
cannot be unambiguously ranked without knowledge of a social choice function assigning weights
to criteria (i)-(iii). In contrast, a quota system is superior to the other two policies on all 3 criteria.
However, quotas are illegal in the US and cannot be implemented as such. Nevertheless, I propose
a variation on the AA policy already in place that is outcome-equivalent to a quota system, and
can be implemented using only information on grades and race.
ON THE PRICING RULE IN ELECTRONIC AUCTIONS
Forthcoming in The International Journal of Industrial Organization(WORKING PAPER VERSION, September 2009)
ABSTRACT: Researchers and experts have typically viewed electronic auctions (such as those implemented by eBay, Amazon, and Yahoo!) as either oral, ascending-price (English) auctions or second-price, sealed-bid (Vickrey) auctions. I show that important theoretical differences exist between English and Vickrey pricing rules and those used in electronic auctions, due to the presence of bid increments. I also show, using data on eBay laptop sales, that these differences have practical significance. I explore the implications of bid increments for strategic bid selection in a static model within the symmetric independent private-values paradigm. I derive the unique symmetric equilibrium bid function, showing that the presence of bid increments can significantly alter bidder behavior. Using numerical methods, I also illustrate that these result in a highly non-linear bid function, in contrast to that predicted under either the English or the Vickrey formats.
MATLAB program files to accompany On the Pricing Rule in Electronic Auctions
Click the link above to download a compressed folder EA_MATLAB_Files.rar which contains a MATLAB program (with supporting files) to compute the equilibrium of an electronic auction. The folder contains a ReadMe file with instructions.
STRUCTURAL AUCTION ECONOMETRICS: A SURVEY, with Yigit Saglam
Latest version: August, 2007
ABSTRACT: We survey the empirical auctions literature, focusing primarily on structural econometric methods based on game-theoretic models of bidding. We begin with a discussion of the various information structures assumed in auctions, after which we categorize and discuss empirical works according to the information structure assumed. We cover both nonparametric methods, as well as parametric methods within classical and Bayesian frameworks. We also include a section on special topics. For each section of the literature, we summarize significant contributions in an attempt to uncover the evolution of the state of the art since the literature began in the late 1980s. Finally, we present our categorization of the papers we have summarized, and others, in various tables in the appendix.