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Auction Design Critical for Rescue Plan

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Abstract

The Treasury proposes to invest $700 billion in mortgage-related securities to resolve the financial crisis, using market mechanisms such as reverse auctions to determine prices. A well-designed auction process can indeed be an effective tool for acquiring distressed assets at minimum cost to the taxpayer. However, a simplistic process could lead to higher cost and fewer securities purchased. It is critical for the auction process to be designed carefully.

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File URL: http://www.cramton.umd.edu/papers2005-2009/ausubel-cramton-auction-for-rescue-plan.pdf
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Bibliographic Info

Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 08adcfrp.

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Length: 3 pages
Date of creation: 2008
Date of revision: 2008
Publication status: Published in The Economists' Voice, 5:5, www.bepress.com/ev/vol5/iss5/art5, September 2008
Handle: RePEc:pcc:pccumd:08adcfrp

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Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu

Related research

Keywords: Auctions; financial auctions; financial crisis;

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Cited by:
  1. Hillinger, Claude, 2008. "How to deal with the US financial crisis at no cost to the taxpayer," Discussion Papers in Economics 6929, University of Munich, Department of Economics.
  2. Lawrence M. Ausubel & Peter Cramton, 2008. "A Troubled Asset Reverse Auction," Papers of Peter Cramton 08tara, University of Maryland, Department of Economics - Peter Cramton, revised 2008.

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