Underpricing in Discriminatory and Uniform-Price Treasury Auctions

2007 ◽  
Vol 42 (2) ◽  
pp. 443-466 ◽  
Author(s):  
David Goldreich
Keyword(s):  
Secondary Market ◽  
Summary Statistics ◽  
Average Price ◽  
Uniform Price ◽  
Treasury Auctions ◽  
Common Value ◽  
Auction Models ◽  
Auction Mechanisms ◽  
Common Value Auction

AbstractThis paper compares the newer uniform-price U.S. Treasury auctions to the traditional discriminatory mechanism and examines the extent to which the auction mechanisms are responsible for underpricing. Empirically, I find that even for the newer uniform-price auctions, the average price received by the Treasury is less than the price of the same securities in the concurrent secondary market although this underpricing is reduced by half relative to the older mechanism. From the summary statistics released by the Treasury, I calibrate common value auction models for the two mechanisms and predict the level of underpricing in each auction. I find that the observed magnitude of underpricing in the auctions is consistent with the model's predictions.

Bond Auctions

2019 ◽  
pp. 547-566
Author(s):  
Mark Wu ◽  
Patrick Herb ◽  
Shishir Paudel
Keyword(s):  
Private Information ◽  
Government Debt ◽  
Secondary Market ◽  
Market Manipulation ◽  
Treasury Auctions ◽  
Market Participants ◽  
Common Value ◽  
Before And After ◽  
The Common

Each week, billions of dollars (or local currency) of government debt securities are sold in auctions to market participants. Central governments want to use the auction mechanism that minimizes both borrowing costs and chances of market manipulation. A liquid secondary market is also pivotal to the success of the auctions. This chapter begins by providing the definitions, mechanism design, bidding process, and method ranking of government debt auctions with a focus on U.S. Treasury auctions. The next section discusses some important issues including the common value assumption, role of private information, and winner’s curse. Large and active markets coexist before and after the auctions, creating possibilities of a short squeeze. When comparing prices in the pre- or post-auction markets with auction prices, the literature documents positive bidder profits (underpricing) on average.

Anomalies: The Winner's Curse

1988 ◽  
Vol 2 (1) ◽  
pp. 191-202 ◽  
Author(s):  
Richard H Thaler
Keyword(s):  
Field Studies ◽  
Risk Averse ◽  
Common Phenomenon ◽  
Winner's Curse ◽  
Winner’S Curse ◽  
Empirical Question ◽  
Common Value ◽  
Winning Bidder ◽  
Common Value Auction ◽  
Very High

Next time that you find yourself a little short of cash for lunch, try the following experiment in your class. Take a jar and fill it with coins, noting the total value of the coins. Now auction off the jar to your class (offering to pay the winning bidder in bills to control for penny aversion). Chances are very high that the following results will be obtained: (1) the average bid will be significantly less than the value of the coins (bidders are risk averse); (2) the winning bid will exceed the value of the jar. Therefore, you will have money for lunch, and your students will have learned first-hand about the “winner's curse.” The winner's curse cannot occur if all the bidders are rational, so evidence of a winner's curse in market settings would constitute an anomaly. However, acting rationally in a common value auction can be difficult. Solving for the optimal bid is not trivial. Thus, it is an empirical question whether bidders in various contexts get it right or are cursed. I will present some evidence, both from experimental and field studies, suggesting that the winner's curse may be a common phenomenon.

Implications of a Reserve Price in an Agent-Based Common-Value Auction

2013 ◽  
Vol 43 (1) ◽  
pp. 33-51 ◽  
Author(s):  
Christopher N. Boyer ◽  
B. Wade Brorsen
Keyword(s):  
Reserve Price ◽  
Agent Based ◽  
Common Value ◽  
Common Value Auction

scholarly journals Strategic Behavior and Underpricing in Uniform Price Auctions: Evidence from Finnish Treasury Auctions

2005 ◽  
Vol 60 (4) ◽  
pp. 1865-1902 ◽  
Author(s):  
MATTI KELOHARJU ◽  
KJELL G. NYBORG ◽  
KRISTIAN RYDQVIST
Keyword(s):  
Strategic Behavior ◽  
Uniform Price ◽  
Treasury Auctions

Negotiation in Agent Based Manufacturing Scheduling Using Auction Models

2005 ◽  
Author(s):  
Chun Wang ◽  
Weiming Shen ◽  
Hamada Ghenniwa
Keyword(s):  
Theoretical Models ◽  
Shop Floor ◽  
Multi Agent Systems ◽  
Solution Quality ◽  
Manufacturing Scheduling ◽  
Agent Based ◽  
Auction Models ◽  
Auction Mechanisms ◽  
Multi Agent

This paper investigates issues in the application of auctions as negotiation mechanisms to agent based manufacturing scheduling. We model the negotiation environments that agents encounter as inter-enterprise environment and intra-enterprise environment. A formulation of intra-enterprise scheduling economy is presented. We proved that at price equilibrium, the solution computed by the agents in the economy is a Pareto optimal. AS our first attempt, we formally formulate automated auction configuration as an optimization problem. By solving the problem adaptive negotiation in multi-agent systems can be achieved. In addition to the theoretical models, we discussed various types of auction mechanisms and their applications to agent based manufacturing scheduling. Heuristics and procedures are proposed for solving the automated auction configuration problem. To validate the analysis and proposed approaches, as a case study, we apply the automated auction configuration heuristics and the procedure to an agent based shop floor scheduling environment. Experimental results show that the auction protocol selected by the proposed heuristics provides correct system functionalities. In addition, we compared the selected mechanism with other candidate mechanisms. We found that the selected one performs better in terms of reducing communication cost and improving solution quality.

Consumer-to-Consumer Internet Auction Models

2013 ◽  
pp. 181-194
Author(s):  
Timothy L. Y. Leung ◽  
William J. Knottenbelt
Keyword(s):  
Arrival Rate ◽  
Fixed Time ◽  
Online Auction ◽  
Internet Auction ◽  
Internet Auctions ◽  
Goods And Services ◽  
Auction Models ◽  
Private Values ◽  
Auction Mechanisms ◽  
Operational Behaviour

Internet auctions have become an increasingly common method for exchanging goods and services across the world both among consumers themselves, as well as between businesses and consumers. These Internet auction mechanisms have the scope of incorporating procedures of much greater complexity and variety, and they exhibit characteristics and properties that are quite distinct from conventional auctions. In this paper, the authors provide an experimental study of the performance characteristics and operational behaviour of a number of online auction models, including the fixed time forward auctions, the Vickrey auctions, and models with soft close variable auction times. These online auction models are studied through systematic simulation experiments, based on a series of operational assumptions, which characterize the arrival rate of bids, as well as the distribution from which the private values of buyers are sampled. Suggestions for efficient online auction design and procedures for improving auction performance are given, and the behaviour of the average auction income and average auction duration are quantified and compared.

Sign in / Sign up

Export Citation Format

Share Document