34 Pages Posted: 3 Nov 2008 Last revised: 18 Oct 2009
Date Written: June 1, 2009
Many financial assets, especially government bonds, are issued by an auction mechanism. An important feature of the design is the auction pricing mechanism: Uniform vs. Discriminatory. Theoretical papers do not provide a definite answer regarding the preference of one mechanism over the other. Experimental papers investigated the issue under an exogenous equal number of bidders. We investigate the bidders choice and the impact of that choice on the outcome of the auction by letting them choose between the two alternative systems. The majority of the bidders in the survey have chosen the uniform method. Those that prefer the uniform auction bid, on average, more aggressively than those that choose the discriminatory one. On average the revenues to the issuer were higher under the uniform price mechanism.
Suggested Citation: Suggested Citation
Brenner, Menachem and Galai, Dan and Sade, Orly, Endogenizing Bidder’s Choice in Financial Assets Auctions – An Experimental Investigation (June 1, 2009). NYU Working Paper No. FIN-07-011. Available at SSRN: https://ssrn.com/abstract=1293147