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Keywords:Auctions 

Working Paper
Disadvantaged business enterprise goals in government procurement contracting: an analysis of bidding behavior and costs
Programs that encourage the participation of disadvantaged business enterprises (DBE) as subcontractors have been a part of government procurement auctions for over three decades. In this paper, we examine the impact of a program that requires prime contractors to subcontract out a portion of a highway procurement project to DBE firms. We study how DBE subcontracting requirements affect bidding behavior in federally funded projects. Within a symmetric independent private value framework, we use the equilibrium bidding function to obtain the cost distribution of firms undertaking projects either with or without subcontracting goals. We then use nonparametric estimation methodsto uncover and compare the cost of firms bidding on a class of asphalt projects related to surface treatment in Texas. The analysis shows little differences in the cost structure between auctions that have subcontracting goals and those that do not.
AUTHORS: Dakshina G. De Silva; Dunne, Timothy; Kosmopoulou, Georgia; Lamarche, Carlos
DATE: 2011

Report
Credit default swap auctions
The rapid growth of the credit default swap (CDS) market and the increased number of defaults in recent years have led to major changes in the way CDS contracts are settled when default occurs. Auctions are increasingly the mechanism used to settle these contracts, replacing physical transfers of defaulted bonds between CDS sellers and buyers. Indeed, auctions will become a standard feature of all recent CDS contracts from now on. In this paper, we examine all of the CDS auctions conducted to date and evaluate their efficacy by comparing the auction outcomes to prices of the underlying bonds in the secondary market. The auctions appear to have served their purpose, as we find no evidence of inefficiency in the process: Participation is high, open interest is low, and the auction prices are close to the prices observed in the bond market before and after each auction has occurred. We qualify our conclusions by noting that relatively few auctions have taken place thus far.
AUTHORS: Helwege, Jean; Maurer, Samuel; Sarkar, Asani; Wang, Yuan
DATE: 2009

Report
Selection bias, demographic effects, and ability effects in common value auction experiments
We find clear demographic and ability effects on bidding in common value auctions: inexperienced women are much more susceptible to the winner's curse than men, controlling for SAT/ACT scores and college major; economics and business majors substantially overbid relative to other majors; and those with superior SAT/ACT scores are much less susceptible to the winner's curse, with the primary effect coming from those with below median scores doing worse, as opposed to those with very high scores doing substantially better, and with composite SAT/ACT score being a more reliable predictor than either math or verbal scores by themselves. There are strong selection effects in bid estimates for both inexperienced and experienced subjects that are not identified using standard econometric techniques but rather through our experimental design effects. Ignoring these selection effects is most misleading for inexperienced bidders, as the unbiased estimates of the bid function indicate much faster learning and adjustment to the winner's curse for individual bidders than do the biased estimates.
AUTHORS: Casari, Marco; Ham, John C.; Kagel, John H.
DATE: 2005

Journal Article
High bid
AUTHORS: Katz, Jane
DATE: 1995

Working Paper
Disadvantaged business enterprise goals in government procurement contracting: an analysis of bidding behavior and costs
Programs that encourage the participation of disadvantaged business enterprises (DBE) as subcontractors have been a part of government procurement auctions for over three decades. In this paper, we examine the impact of a program that requires prime contractors to subcontract out a portion of a highway procurement project to DBE firms. We study how DBE subcontracting requirements affect bidding behavior in federally funded projects. Within a symmetric independent private value framework, we use the equilibrium bidding function to obtain the cost distribution of firms undertaking projects either with or without subcontracting goals. We then use nonparametric estimation methodsto uncover and compare the cost of firms bidding on a class of asphalt projects related to surface treatment in Texas. The analysis shows little differences in the cost structure between auctions that have subcontracting goals and those that do not.
AUTHORS: Dunne, Timothy; Kosmopoulou, Georgia; Lamarche, Carlos; Dakshina G. De Silva
DATE: 2011

Journal Article
Treasury auctions: what do the recent models and results tell us?
Auctions, as selling mechanisms, have existed for well over two thousand years. Today, one of the most important auction markets in the world is that of U.S. Treasury securities; approximately $2 trillion worth of Treasury securities was auctioned in 1995. ; A long-standing debate has been about selecting an appropriate auction format for various Treasury securities, a format that would be least subject to possible manipulation by individual traders or a cartel and also result in the highest possible revenues for the Treasury. The Treasury is currently experimenting with what is called a uniform-price format for auctioning two- and five-year Treasury notes. A similar mechanism might be put into broader use. ; This article explains Treasury auctions in light of recent theoretical research and related empirical evidence. Empirically there seems to be no discernible difference between discriminatory and uniform-price auctions in terms of revenue to the Treasury. The author concludes that the proposal to switch to electronic ascending-price open-outcry auctions with an implied uniform price may be worthy of more consideration.
AUTHORS: Nandi, Saikat
DATE: 1997

Journal Article
Going once, going twice, sold: auctions and the success of economic theory
It has been said that, "the value of anything is not what it cost to produce, but what you can get for it at an auction." The U.S. government's proving just that with its auctioning off of telecommunication license.
AUTHORS: Zaretsky, Adam M.
DATE: 1998

Working Paper
The fragility of discretionary liquidity provision - lessons from the collapse of the auction rate securities market
We study the fragility of discretionary liquidity provision by major financial intermediaries during systemic events. The laboratory of our study is the recent collapse of the auction rate securities (ARS) market. Using a comprehensive dataset constructed from auction reports and intraday transactions data on municipal ARS, we present quantitative evidence that auction dealers acted at their own discretion as "market makers" before the market collapsed. We show that this discretionary liquidity provision greatly affected both net investor demand and auction clearing rates. Importantly, such discretionary liquidity provision is fragile. As auction dealers suffered losses from other financial markets and faced increasing inventory pressure, they stopped making markets. Moreover, the drop in support occurred suddenly, apparently triggered by the unexpected withdrawal of one major broker-dealer.
AUTHORS: Li, Dan; Han, Song
DATE: 2010

Working Paper
The auctions of Swiss government bonds: should the Treasury price discriminate or not?
Ever since Friedman's (1960) contribution, there has been an ongoing controversy about whether the Treasury should auction off its government debt with a discriminatory or with a uniform price format. Many industrialized countries, the United States or Germany, for instance, use discriminatory auctions, while Switzerland applies to uniform price rule. Using recent contributions to multi-unit auction theory, we analyze data on the bids submitted to Swiss Treasury bond auctions over the last three years. We then construct hypothetical bid functions that would occur under price discrimination. Based on these bid functions, we determine which auction format minimizes the government's costs of financing its debt.
AUTHORS: Heller, Daniel; Lengwiler, Yvan
DATE: 1998

Working Paper
Computationally convenient distributional assumptions for common value auctions
Although the mathematical foundations of common value auctions have been well understood since Milgrom & Weber (1982), equilibrium bidding strategies are computationally complex. Very few calculated examples can be found in the literature, and only for highly specialized cases. This paper introduces two sets of distributional assumptions that are flexible enough for theoretical and empirical applications and yet permit straightforward calculation of equilibrium bidding strategies.
AUTHORS: Gordy, Michael B.
DATE: 1997

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