A New Auction for Substitutes: Central-Bank Liquidity Auctions, "Toxic Asset" Auctions, and Variable Product-Mix Auctions
AbstractI 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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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2009-W06.
Date of creation: 01 Apr 2009
Date of revision:
Multi-object auction; TARP; Central banking; Simultaneous ascending auction; Treasury auction; Term auction; Toxic assets;
Other versions of this item:
- Paul Klemperer, 2009. "A New Auction for Substitutes: Central-Bank Liquidity Auctions, “Toxic Asset” Auctions, and Variable Product-Mix Auctions," Economics Papers 2009-W06, Economics Group, Nuffield College, University of Oxford.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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