Discriminatory versus uniform-price auctions

Zoltán Monostori

No 2014/111, MNB Occasional Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: The purpose of this paper is to compare the two auction techniques (discriminatory and uniform-price auctions) most commonly used for the sale of securities. Literature tends to analyze methods from the aspect of the expected revenue from the auction. Theoretical models arrive at different rankings for expected revenue; however, they do reveal the relationship between the bids submitted and the auction technique. These results are confirmed both by ‘laboratory’ experiments and the empirical evidence of real-world auctions. The latter may also provide a robust answer to the question of expected revenue; the uniform-price format coming out as the more beneficial for the Treasury. Still, at present the global majority of issuers of government bonds use the discriminatory-price format and central bank instruments also tend to be sold in this format. This is because issuers may have considerations other than expected revenue.

Keywords: auction; central bank auctions; treasury auctions; discriminatory auctions; uniform-price auctions (search for similar items in EconPapers)
JEL-codes: C78 D44 D53 D82 H63 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014
New Economics Papers: this item is included in nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:mnb:opaper:2014/111

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