CÍMLAP
Monostori Zoltán
Discriminatory versus uniform-price auctions
CONTENTS, ABSTRACT
Contents
Abstract
1 Introduction
2 Theoretical results
2.1 Theorems for single-unit auctions
2.2 Misconceptions in connection with multi-unit auctions
2.3 Bid curves submitted in multi-unit auctions
2.4 Winner's curse
2.5 Risk aversion
2.6 Fog of war
2.7 Secondary market, forward market, collusion
2.8 Summary of theoretical results
3 Laboratory experiments
4 Non-laboratory empirical evidence
4.1 Empirical evidence of uniform-price auctions
4.2 Empirical evidence of discriminatory-price auctions
4.3 Empirical comparison of uniform-price and discriminatory-price auctions
5 International practice
6 Summary and conclusion
References
Appendix
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.