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Auctioning Securities

Lawrence M. Ausubel () and Peter Cramton ()
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Lawrence M. Ausubel: Economics Department, University of Maryland, http://www.econ.umd.edu

Papers of Peter Cramton from University of Maryland, Department of Economics - Peter Cramton

Abstract: Treasury debt and other divisible securities are traditionally sold in either a pay-your-bid (discriminatory) auction or a uniform-price auction. We compare these auction formats with a Vickrey auction and also with two ascending-bid auctions. The Vickrey auction and the alternative ascending-bid auction (Ausubel 1996) have important theoretical advantages for sellers. In a setting without private information, these auctions achieve the maximal revenue as a unique equilibrium in dominant strategies. In contrast, the pay- your-bid, uniform-price, and standard ascending-bid auction admit a multiplicity of equilibria that yield low revenues for the seller. We show how these results extend to a setting where bidders have affiliated private information. Our results question the standard ways that securities are offered to the public.

Keywords: Auctions; Multi-Unit Auctions, Security Auctions, Treasury Auctions (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Pages: 15 pages
Date: 1997-02, Revised 1998-03
Note: Working Paper
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