Discriminatory versus uniform-price auctions
AbstractThe purpose of this paper is to compare the two auction techniques (discriminatory and uniform-price auctions) most commonly used for the sale of securities. Literature tends to analyze methods from the aspect of the expected revenue from the auction. Theoretical models arrive at different rankings for expected revenue; however, they do reveal the relationship between the bids submitted and the auction technique. These results are confirmed both by ‘laboratory’ experiments and the empirical evidence of real-world auctions. The latter may also provide a robust answer to the question of expected revenue; the uniform-price format coming out as the more beneficial for the Treasury. Still, at present the global majority of issuers of government bonds use the discriminatory-price format and central bank instruments also tend to be sold in this format. This is because issuers may have considerations other than expected revenue.
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Bibliographic InfoPaper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Occasional Papers with number 2014/111.
Length: 36 pages
Date of creation: 2014
Date of revision:
auction; central bank auctions; treasury auctions; discriminatory auctions; uniform-price auctions;
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
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