Working Paper

Collusion in uniform-price auctions: experimental evidence and implications for Treasury auctions

Abstract: In uniform-price auctions of shares there exist collusive equilibria in which bidders capture the entire surplus from the auction as well as competitive equilibria in which the auctioneer captures the entire surplus from the auction. We provide experimental evidence that, in uniform-price auctions, non-binding pre-play communication facilitates convergence to collusive equilibrium outcomes. On the other hand, regardless of the opportunities for communication, in discriminatory-auction experiments subject strategies conform closely with the unique equilibrium in undominated strategies in which bidders' gains are equal to the smallest \"tick size\" in the bidding schedule. This evidence suggests that uniform-price auctions of Treasury securities may result in lower revenues than the currently employed discriminatory procedure.

Keywords: Government securities; Treasury bills;

Status: Published in Review of Financial Studies, Fall 1996

Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: FRB Atlanta Working Paper

Publication Date: 1995

Number: 95-5