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A New Auction for Substitutes: Central-Bank Liquidity Auctions, “Toxic Asset” Auctions, and Variable Product-Mix Auctions

  • Paul Klemperer

    ()

    (Nuffield College, University of Oxford, Oxford)

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.nuffield.ox.ac.uk/economics/papers/2009/w6/BoeTarp28_7_09.pdf
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Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2009-W06.

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Length: 15 pages
Date of creation: 01 Jul 2009
Date of revision:
Handle: RePEc:nuf:econwp:0906
Contact details of provider: Web page: https://www.nuffield.ox.ac.uk/economics/

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