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Testing for Common Values in Canadian Treasury Bill Auctions

Author

Listed:
  • Ali Hortacsu

    (Department of Economics, Universit of Chicago)

  • Jakub Kastl

    (Department of Economics, Stanford University)

Abstract

We develop a test for common values in auctions in which some bidders possess information about rivals’ bids. This information causes a bidder to bid differently when she has a private value than when her value depends on rivals’ information. In a divisible good setting, such as treasury bill auctions, bidders with private values who obtain information about rivals’ bids use this information only to update their prior about the distribution of residual supply. In the model with a common value component, they also update their prior about the value of the good being auctioned.We apply the data from the Canadian treasury bill market, where some bidders have to route their bids through dealers who also submit bids on their own. Furthermore, we use the structural model to estimate the value of customer order flow to a dealer. We find that the extra information contained in customers’ bids leads on average to an increase in payoff equal to about 0.5 of a basis point, or 32% of the expected surplus of dealers from participating in these auctions. Creation Date: 2008-07 Revision Date:

Suggested Citation

  • Ali Hortacsu & Jakub Kastl, "undated". "Testing for Common Values in Canadian Treasury Bill Auctions," Discussion Papers 07-053, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:07-053
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    References listed on IDEAS

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    Cited by:

    1. Klenio Barbosa & Dakshina De Silva & Liyu Yang & Hisayuki Yoshimoto, 2019. "Auction Mechanisms and Treasury Revenue," Working Papers 267027285, Lancaster University Management School, Economics Department.
    2. Jonathan B. Hill & Artyom Shneyerov, 2009. "Are There Common Values in BC Timber Sales? A Tail-Index Nonparametric Test," Working Papers 09003, Concordia University, Department of Economics.

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    More about this item

    Keywords

    multiunit auctions; treasury auctions; structural estimation; nonparametric identification and estimation; test for common value;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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