Auctions of Divisible Goods: On the Rationale for the Treasury Experiment

Kerry Back; Jaime F. Zender

doi:10.1093/rfs/6.4.733

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Auctions of Divisible Goods: On the Rationale for the Treasury Experiment

Kerry Back¹; Jaime F. Zender²

¹ Washington University in St. Louis · ² University of Utah

Review of Financial Studies 1993

We compare a sealed-bid uniform-price auction (the Treasury’s experimental format) with a sealed-bid discriminatory auction (the Treasury’s format heretofore), assuming the good is perfectly divisible. We show that the auction theory that prompted the experiment, which assumes single-unit demands, does not adequately describe the bidding game for Treasury securities. Collusive strategies are self-enforcing in uniform-price divisible-good auctions. In these equilibria, the seller’s expected revenue is lower than in equilibria of discriminatory auctions.

DOI: 10.1093/rfs/6.4.733
Volume: 6 (4)
Pages: 733-764
Language: en
Export: BibTeX
Sources: crossref openalex