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Journal Article
Designing effective auctions for treasury securities
Most discussions of treasury auction design focus on the choice between two methods for issuing securities--uniform-price or discriminatory auctions. Although auction theory and much recent research appear to favor the uniform-price method, most countries conduct their treasury auctions using the discriminatory format. What are the main issues underlying the debate over effective auction design?
Journal Article
The institutionalization of treasury note and bond auctions, 1970-75
The substitution of auctions for fixed-price offerings was expected to lower the U.S. Treasury's cost of financing the federal debt. Despite this and other potential benefits, the Treasury failed in both 1935 and 1963 in its attempts to introduce regular auction sales of coupon-bearing securities. This article examines the Treasury's third and successful attempt between 1970 and 1975. The author identifies three likely reasons why the Treasury succeeded in the early 1970s: it closely imitated its successful and well-understood bill auction process, it extended the maturity of auction ...
Working Paper
Competing with asking prices
In many markets, sellers advertise their good with an asking price. This is a price at which the seller is willing to take his good off the market and trade immediately, though it is understood that a buyer can submit an offer below the asking price and that this offer may be accepted if the seller receives no better offers. Despite their prevalence in a variety of real world markets, asking prices have received little attention in the academic literature. We construct an environment with a few simple, realistic ingredients and demonstrate that using an asking price is optimal: it is the ...
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. ...
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.
Journal Article
Who buys Treasury securities at auction?
The U.S. Treasury Department now releases fuller information about its auctions than in the past, including new information on investor class and bidder category. The investor class data shed light on the distribution of demand for government securities, and the bidder category data, released first, offer an early read on demand. Purchases by indirect bidders, in particular, are a fairly good proxy for foreign purchases of Treasury notes, but not Treasury bills.
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 ...
Speech
Some observations and lessons from the crisis
Remarks at the Third Annual Connecticut Bank and Trust Company Economic Outlook Breakfast, Hartford, Connecticut.
Journal Article
High bid
Journal Article
The Treasury auction process: objectives, structure, and recent acquisitions
Treasury auctions are designed to minimize the cost of financing the national debt by promoting broad, competitive bidding and liquid secondary market trading. A review of the auction process-from the announcement of a new issue to the delivery of securities-reveals how these objectives have been met. Also highlighted are changes in the auction process that stem from recent advances in information-processing technologies and risk management techniques.