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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

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.nuff.ox.ac.uk/economics/papers/2009/w6/BoeTarp28_7_09.pdf
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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2009-W06.

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Date of creation: 01 Apr 2009
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Handle: RePEc:oxf:wpaper:2009-w06

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Related research

Keywords: Multi-object auction; TARP; Central banking; Simultaneous ascending auction; Treasury auction; Term auction; Toxic assets;

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  1. Ilan Kremer, 2004. "Underpricing and Market Power in Uniform Price Auctions," Review of Financial Studies, Society for Financial Studies, vol. 17(3), pages 849-877.
  2. 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.
  3. 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.
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Cited by:
  1. Xavier Vives, 2008. "Strategic Supply Function Competition with Private Information," CESifo Working Paper Series 2410, CESifo Group Munich.
  2. Xavier Vives, 2010. "Asset Auctions, Information, and Liquidity," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 467-477, 04-05.

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