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Asset auctions, information and liquidity

Author Info

  • Vives, Xavier

    ()

    (IESE Business School)

Abstract

A model is presented of a uniform price auction where bidders compete in demand schedules; the model allows for common and private values in the absence of exogenous noise. It is shown how private information yields more market power than the levels seen with full information. Results obtained here are broadly consistent with evidence from asset auctions, may help explain the response of central banks to the crisis and suggest potential improvements in the auction formats of asset auctions.

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Paper provided by IESE Business School in its series IESE Research Papers with number D/837.

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Length: 17 pages
Date of creation: 03 Dec 2009
Date of revision:
Handle: RePEc:ebg:iesewp:d-0837
Contact details of provider: Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
Web page: http://www.iese.edu/
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Keywords: adverse selection; market power; reverse auctions; bid shading;

Other versions of this item:

Find related papers by JEL classification:
  • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
  • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
  • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
  • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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  1. Paul Klemperer, 2009. "A New Auction for Substitutes: Central-Bank Liquidity Auctions, "Toxic Asset" Auctions, and Variable Product-Mix Auctions," Economics Series Working Papers 2009-W06, University of Oxford, Department of Economics.
  2. Marco LiCalz & Alessandro Pavan, 2002. "Tilting the Supply Schedule to Enhance Competition on Uniform-Price Auctions," Discussion Papers 1495, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Christian Ewerhart & Nuno Cassola & Natacha Valla, 2007. "Declining Valuations And Equilibrium Bidding In Central Bank Refinancing Operations," Swiss Finance Institute Research Paper Series 07-22, Swiss Finance Institute.
  4. George-Marios Angeletos & Alessandro Pavan, 2007. "Policy with Dispersed Information," NBER Working Papers 13590, National Bureau of Economic Research, Inc.
  5. Bindseil, Ulrich & Nyborg, Kjell G. & Strebulaev, Ilya A., 2005. "Bidding and Performance in Repo Auctions: Evidence from ECB Open Market Operations," Discussion Papers 2005/13, Department of Business and Management Science, Norwegian School of Economics.
  6. Keloharju, Matti & Nyborg, Kjell G & Rydqvist, Kristian, 2002. "Strategic Behaviour and Underpricing in Uniform Price Auctions: Evidence from Finnish Treasury Auctions," CEPR Discussion Papers 3586, C.E.P.R. Discussion Papers.
  7. Gautam Goswami & Thomas Noe & Michael Rebello, 1995. "Collusion in uniform-price auctions: experimental evidence and implications for Treasury auctions," Working Paper 95-5, Federal Reserve Bank of Atlanta.
  8. Xavier Vives, 2011. "Strategic Supply Function Competition With Private Information," Econometrica, Econometric Society, vol. 79(6), pages 1919-1966, November.
  9. Biais, Bruno & Martimort, David & Rochet, Jean-Charles, 1998. "Competing Mechanisms in a Commun Value Environment," IDEI Working Papers 75, Institut d'Économie Industrielle (IDEI), Toulouse.
  10. Ayuso, J. & Repullo, R., 2000. "A Model of the Open Market Operations of the European Central Bank," Papers 0011, Centro de Estudios Monetarios Y Financieros-.
  11. Kandel, Shmuel & Sarig, Oded & Wohl, Avi, 1999. "The Demand for Stocks: An Analysis of IPO Auctions," Review of Financial Studies, Society for Financial Studies, vol. 12(2), pages 227-47.
  12. Bhattacharya, Utpal & Spiegel, Matthew, 1991. "Insiders, Outsiders, and Market Breakdowns," Review of Financial Studies, Society for Financial Studies, vol. 4(2), pages 255-82.
  13. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  14. Tenorio, Rafael, 1997. "Some evidence on strategic quantity reduction in multiple unit auctions," Economics Letters, Elsevier, vol. 55(2), pages 209-213, August.
  15. Kyle, Albert S, 1989. "Informed Speculation with Imperfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 56(3), pages 317-55, July.
  16. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
  17. Motty Perry & Philip J. Reny, 1999. "On The Failure of the Linkage Principle in Multi-Unit Auctions," Econometrica, Econometric Society, vol. 67(4), pages 895-900, July.
  18. 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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Cited by:

  1. Xavier Vives, 2012. "Strategic Complementarity, Fragility, and Regulation," 2012 Meeting Papers 789, Society for Economic Dynamics.
  2. Xavier Vives, 2010. "Competition and Stability in Banking," Working Papers Central Bank of Chile 576, Central Bank of Chile.

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