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

  • Paul Klemperer

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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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
Date of revision:
Handle: RePEc:oxf:wpaper:2009-w06
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  1. Professor Paul Klemperer, 2000. "What Really Matters in Auction Design," Microeconomics 0004008, EconWPA.
  2. Paul Milgrom, 2000. "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 245-272, April.
  3. Bénédicte Vidaillet & V. D'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
  4. repec:cup:cbooks:9780521551847 is not listed on IDEAS
  5. 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.
  6. 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.
  7. repec:cup:cbooks:9780521536721 is not listed on IDEAS
  8. 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.
  9. Crawford, Vincent P & Knoer, Elsie Marie, 1981. "Job Matching with Heterogeneous Firms and Workers," Econometrica, Econometric Society, vol. 49(2), pages 437-50, March.
  10. Kelso, Alexander S, Jr & Crawford, Vincent P, 1982. "Job Matching, Coalition Formation, and Gross Substitutes," Econometrica, Econometric Society, vol. 50(6), pages 1483-1504, November.
  11. Robert A. Mundell & Paul J. Zak, 2005. "Introduction," Chapters, in: International Monetary Policy after the Euro, chapter 1 Edward Elgar.
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