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Discriminatory vs Uniform Price Auction: Auction Revenue

Author

Listed:
  • Keunkwan Ryu
  • Gyung-Rok Kim
  • Seonghwan Oh

Abstract

We compare auction revenues from discriminatory auctions and uniform price auctions in the case of the Korean treasury bonds auction market. For this purpose, we employ detailed bidder level data for each of 16 discriminatory auctions recently carried out in Korea. We first theoretically recover unobserved individual bidding functions under counter-factual uniform price auctions from the observed bidding functions under the actual discriminatory auctions, and then empirically estimate revenue differences. To test significance of the auction revenue differences, we use Bootstrap re-sampling methods where uncertainty in the cut-off yield spreads and uncertainty in the bidders are addressed individually as well as simultaneously. Our results indicate that uniform price auction increases the auction revenue relative to the discriminatory auction in most of the 16 cases, justifying the Korean government’s decision to switch to the uniform price auction mechanism in August 2000

Suggested Citation

  • Keunkwan Ryu & Gyung-Rok Kim & Seonghwan Oh, 2004. "Discriminatory vs Uniform Price Auction: Auction Revenue," Econometric Society 2004 Far Eastern Meetings 539, Econometric Society.
  • Handle: RePEc:ecm:feam04:539
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    References listed on IDEAS

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    1. Daniel Heller & Yvan Lengwiler, 1998. "The auctions of Swiss government bonds: should the Treasury price discriminate or not?," Finance and Economics Discussion Series 1998-11, Board of Governors of the Federal Reserve System (U.S.).
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    More about this item

    Keywords

    Treasury bonds auction; discriminatory auction; uniform price auction; hazard rate; Bootstrap re-sampling; yield spread; bidding function; bid shading;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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