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Treasury Auctions, Uniform or Discriminatory?: An Agent-based Approach

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  • Deddy Koesrindartoto

Abstract

This study explores the use of the agent based computational economics (ACE) technique to address the question of how a Treasury should auction its securities. In particular, this study explores whether a Treasury should use a discriminatory-price rule. Buyers are modeled as profit seekers that are capable of submitting strategic bids via reinforcement learning. The buyers' profits are determined by auction prices and ex-post competitive resale prices. Experimental designs focus on four treatment varibles: (1) the buyers' learning representation; (2) market structures; (3) volatility of security prices in the secondary market; and (4) relative capacity (RCAP). Experimental findings show that security price volatility in the secondary market has little effect on market outcomes. However, market outcomes are sensitive to market structures, RCAP, and the buyers' learning representation. The two different auction rules result in different, persistent, systematically patterned market outcomes. Moreover, these findings help to explain why discrepancies have arisen among previous Treasury auction studies.
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Suggested Citation

  • Deddy Koesrindartoto, 2003. "Treasury Auctions, Uniform or Discriminatory?: An Agent-based Approach," Computing in Economics and Finance 2003 241, Society for Computational Economics.
    • Handle: RePEc:sce:scecf3:241
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    References listed on IDEAS

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    1. Natalia Fabra, 2003. "Tacit Collusion in Repeated Auctions: Uniform Versus Discriminatory," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 271-293, September.
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    5. Koesrindartoto, Deddy P., 2002. "Discrete Double Auctions with Artificial Adaptive Agents: A Case Study of an Electricity Market Using a Double Auction Simulator," Staff General Research Papers Archive 10017, Iowa State University, Department of Economics.
    6. Simon, David P, 1994. "The Treasury's Experiment with Single-Price Auctions in the Mid-1970s: Winner's or Taxpayer's Curse?," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 754-760, November.
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    8. Mr. Robert A Feldman & Mr. Vincent Reinhart, 1995. "Flexible Estimation of Demand Schedules and Revenue Under Different Auction Formats," IMF Working Papers 1995/116, International Monetary Fund.
    9. Goswami, Gautam & Noe, Thomas H & Rebello, Michael J, 1996. "Collusion in Uniform-Price Auctions: Experimental Evidence and Implications for Treasury Auctions," The Review of Financial Studies, Society for Financial Studies, vol. 9(3), pages 757-785.
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    Cited by:

    1. Monostori, Zoltán, 2013. "Diszkriminatív áras és egyenáras aukciók [Discriminatory and uniform-price auctions]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1048-1074.
    2. Markose, Sheri & Alentorn, Amadeo & Koesrindartoto, Deddy & Allen, Peter & Blythe, Phil & Grosso, Sergio, 2007. "A smart market for passenger road transport (SMPRT) congestion: An application of computational mechanism design," Journal of Economic Dynamics and Control, Elsevier, vol. 31(6), pages 2001-2032, June.
    3. Sheri Markose, 2006. "Developments in experimental and agent-based computational economics (ACE): overview," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 1(2), pages 119-127, November.

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    More about this item

    Keywords

    Agent-based; treasury auctions;

    JEL classification:

    • C0 - Mathematical and Quantitative Methods - - General

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