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Auctions for Government Securities: A Laboratory Comparison of Uniform, Discriminatory and Spanish Designs

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  • Klaus Abbink
  • Jordi Brandts

    ()

  • Paul Pezanis-Christou

Abstract

The Bank of Spain uses a unique auction format to sell government bonds, which can be seen as a hybrid of a uniform and a discriminatory auction. For winning bids above the average winning bid, buyers are charged the average winning bid, otherwise they pay their respective bids. We report on an experiment that compares this auction format to the discriminatory format, used in most other countries, and to the uniform format. Our design is based on a common value model with multi-unit supply and two-unit demand. The results show significantly higher revenue with the Spanish and the uniform formats than with the discriminatory one, while volatility of prices over time is significantly lower in the discriminatory format than in the Spanish and uniform cases. Actual price dispersion is significantly larger in the discriminatory than in the Spanish. Our data also exhibit the use of bid-spreading strategies in all three designs.

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Bibliographic Info

Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 551.02.

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Length: 22
Date of creation: 01 Nov 2002
Date of revision:
Handle: RePEc:aub:autbar:551.02

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Keywords: Treasury; Spanish auctions; discriminatory auctions; uniform auctions; multi-unit demand; common values; experimental economics;

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References

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Citations

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Cited by:
  1. Damianov, Damian S. & Oechssler, Jörg & Becker, Johannes Gerd, 2007. "Uniform vs. Discriminatory Auctions with Variable Supply - Experimental Evidence," Sonderforschungsbereich 504 Publications 07-68, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  2. RLobert F. Vesztegy, Serizawa & Kenju Akai & Tatsuyoshi Saijo & Shigehiro Serizawa, 2009. "Auctions with Endogenous Price Ceiling:Theoretical and Experimental Results," ISER Discussion Paper 0747, Institute of Social and Economic Research, Osaka University.
  3. Alan Mehlenbacher, 2007. "Multiagent System Simulations of Treasury Auctions," Department Discussion Papers 0709, Department of Economics, University of Victoria.
  4. Rosen, Christiane & Madlener, Reinhard, 2013. "An Experimental Analysis of Single vs. Multiple Bids in Auctions of Divisible Goods," FCN Working Papers 8/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised Nov 2013.
  5. Reeson, Andrew F. & Rodriguez, Luis C. & Whitten, Stuart M. & Williams, Kristen & Nolles, Karel & Windle, Jill & Rolfe, John, 2011. "Adapting auctions for the provision of ecosystem services at the landscape scale," Ecological Economics, Elsevier, vol. 70(9), pages 1621-1627, July.
  6. Olivier Armantier & Nourredine Lafhel, 2009. "Comparison of Auction Formats in Canadian Government Auctions," Working Papers 09-5, Bank of Canada.
  7. Alvarez, Francisco & Mazon, Cristina, 2007. "Comparing the Spanish and the discriminatory auction formats: A discrete model with private information," European Journal of Operational Research, Elsevier, vol. 179(1), pages 253-266, May.
  8. Anthony M. Kwasnica & Katerina Sherstyuk, 2013. "Multi-Unit Auctions," Working Papers 201301, University of Hawaii at Manoa, Department of Economics.

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