The Default-Prone U.S. Toxic Asset Auction Plan
AbstractApplying auction theory to the toxic-asset rescue plan currently released by the United States Treasury Department, this paper demonstrates an equilibrium where moderately poor bidders outbid rich bidders in such auctions. After defeating their rich rivals and acquiring the toxic assets, such bidders will default on government-provided loans whenever the toxic assets turn out to be unsalvageable. An alternative mechanism is discussed.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.
Volume (Year): 9 (2009)
Issue (Month): 1 (May)
Contact details of provider:
Web page: http://www.degruyter.com
Other versions of this item:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zheng, Charles Z., 2001.
"High Bids and Broke Winners,"
Journal of Economic Theory,
Elsevier, vol. 100(1), pages 129-171, September.
- Ottorino Chillemi & Claudio Mezzetti, 2014. "Optimal procurement mechanisms: bidding on price and damages for breach," Economic Theory, Springer, vol. 55(2), pages 335-355, February.
- Linus Wilson, 2011. "Troubling Research on Troubled Assets: Charles Zheng on the U.S. Toxic Asset Auction Plan," Econ Journal Watch, Econ Journal Watch, vol. 8(1), pages 33-38, January.
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