Discriminatory vs Uniform Price Auction: Auction Revenue

Keunkwan Ryu, Gyung-Rok Kim and Seonghwan Oh

No 539, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: We compare auction revenues from discriminatory auctions and uniform price auctions in the case of the Korean treasury bonds auction market. For this purpose, we employ detailed bidder level data for each of 16 discriminatory auctions recently carried out in Korea. We first theoretically recover unobserved individual bidding functions under counter-factual uniform price auctions from the observed bidding functions under the actual discriminatory auctions, and then empirically estimate revenue differences. To test significance of the auction revenue differences, we use Bootstrap re-sampling methods where uncertainty in the cut-off yield spreads and uncertainty in the bidders are addressed individually as well as simultaneously. Our results indicate that uniform price auction increases the auction revenue relative to the discriminatory auction in most of the 16 cases, justifying the Korean government’s decision to switch to the uniform price auction mechanism in August 2000

Keywords: Treasury bonds auction; discriminatory auction; uniform price auction; hazard rate; Bootstrap re-sampling; yield spread; bidding function; bid shading (search for similar items in EconPapers)
JEL-codes: C51 C81 D44 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (3)

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