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Working Paper
Collusion in uniform-price auctions: experimental evidence and implications for Treasury auctions
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 ...
Working Paper
Interest rate swaps and economic exposure
The interest rate swap market has grown rapidly. Since the inception of the swap market in 1981, the outstanding notional principal of interest rate swaps has reached a level of $12.81 trillion in 1995. Recent surveys indicate that interest rate swaps are the most commonly used interest rate derivative by nonfinancial firms and that nonfinancial firms are major users of interest rate swaps. In this paper, we provide an economic rationale for the use of interest rate swaps by such nonfinancial firms. In a global economy, given the floating exchange rate regime, nonfinancial firms face economic ...