Treasury bill auctions: Do bidders’ cost of funds and winning probability matter?

Enmeng Liu, Jiapeng Liu, Hong Qiu and Jia Wang

Economics Letters, 2019, vol. 182, issue C, 101-104

Abstract: We model heterogeneous bidders’ bidding decisions and derive equilibrium solutions under both discriminatory and uniform price auctions. Under the assumptions that bidders’ cost of funds is uniformly distributed, and the winning probability is a linear decreasing function of the quoted price, we show that a revenue maximizing issuer should consider bidders’ cost of funds and winning probability when choosing the optimal auction mechanism.

Keywords: Discriminatory auction; Uniform price auction; Treasury securities; Cost of funds; Winning probability (search for similar items in EconPapers)
JEL-codes: D44 G1 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:182:y:2019:i:c:p:101-104

DOI: 10.1016/j.econlet.2019.06.014

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