Hybrid Mechanism: Structural Model and Empirical Analysis∗

We study a hybrid mechanism that combines auction and lottery to allocate indivisible goods. One advantage of hybrid mechanism is to balance e ciency, revenue, and equality. In this model, players self-select into a multi-unit auction with unknown number of bidders. We characterize one symmetric Bayesian Nash equilibrium where auction participants use a monotone bid function. Based on this equilibrium, we identify structural primitives of the model from observables, from which we are able to quantify various performance measures. We then apply the model to analyze the hybrid mechanism adopted in Guangzhou to allocate new vehicle licenses. With this application in mind, we develop a by-period estimation method to balance modelt and interpretability of estimation results. Our analysis shows that Guangzhou's practice increases equality by 10-fold at a cost of $1.45 million revenue every month.