A New Auction for Substitutes: Central-Bank Liquidity Auctions, "Toxic Asset" Auctions, and Variable Product-Mix Auctions
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".
|Date of creation:||01 Apr 2009|
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