Replacing Sample Trimming with Boundary Correction in Nonparametric Estimation of First-Price Auctions∗

Two-step nonparametric estimators have become standard in empirical auctions. A drawback concerns boundary effects which cause inconsistencies near the endpoints of the support and bias in finite samples. To cope, sample trimming is typically used which leads to non-random data loss. Monte Carlo experiments show this leads to poor performance near the support boundaries and on the interior due bandwidth-selection issues. We propose a modification which employs boundary-correction techniques, demonstrating substantial improvement in finite-sample performance. We implement the new estimator using oil lease auctions data and find that trimming masks a substantial degree of bidder asymmetry and inefficiency in allocations.