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A New Auction for Substitutes: Central-Bank Liquidity Auctions, “Toxic Asset” Auctions, and Variable Product-Mix Auctions

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Author Info

  • Paul Klemperer

    ()
    (Nuffield College, University of Oxford, Oxford)

Abstract

I describe a new static (sealed-bid) auction for multiple substitute goods. As in a two-sided simultaneous multiple round auction (SMRA), bidders bid on multiple assets simultaneously, and bid-takers choose supply functions across assets. The auction yields more efficiency, revenue, information, and trade than running multiple separate auctions, but is often simpler to use and understand, and less vulnerable to collusion, than a SMRA. I designed it after the 2007 Northern Rock bank run to help the Bank of England fight the credit crunch; in 2008 the U.S. Treasury planned (but later cancelled) using a related design to buy “toxic assets”.

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File URL: http://www.nuffield.ox.ac.uk/economics/papers/2009/w6/BoeTarp28_7_09.pdf
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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2009-W06.

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Length: 15 pages
Date of creation: 01 Jul 2009
Date of revision:
Handle: RePEc:nuf:econwp:0906

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Web page: http://www.nuff.ox.ac.uk/economics/

Related research

Keywords: multi-object auction; TARP; central banking; simultaneous ascending auction; treasury auction; term auction; toxic assets.;

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  1. Paul Klemperer & Margaret Meyer, 1986. "Price Competition vs. Quantity Competition: The Role of Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 618-638, Winter.
  2. Kremer, Ilan & Nyborg, Kjell G, 2004. "Underpricing and Market Power in Uniform Price Auctions," CEPR Discussion Papers 4363, C.E.P.R. Discussion Papers.
  3. Lawrence M. Ausubel & Peter Cramton & Emel Filiz-Ozbay & Nathaniel Higgins & Erkut Ozbay & Andrew Stocking, 2009. "Common-Value Auctions with Liquidity Needs: An Experimental Test of a Troubled Assets Reverse Auction," Papers of Peter Cramton 09cvawln, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
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Cited by:
  1. Vives, Xavier, 2008. "Strategic Supply Function Competition with Private Information," CEPR Discussion Papers 6960, C.E.P.R. Discussion Papers.
  2. Vives, Xavier, 2010. "Asset Auctions, Information, and Liquidity," CEPR Discussion Papers 7670, C.E.P.R. Discussion Papers.

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