Auctions for Government Securities: A Laboratory Comparison of Uniform, Discriminatory and Spanish Designs

UFAE and IAE Working Paper No. 551.02

23 Pages Posted: 25 Mar 2003

See all articles by Klaus Abbink

Klaus Abbink

University of Nottingham - School of Economics

Jordi Brandts

Instituto de Analisis Economico (CSIC) Barcelona

Paul Pezanis-Christou

U. of Adelaide School of Economics

Date Written: November 2002

Abstract

The Bank of Spain uses a unique auction format to sell government bonds, which can be seen as a hybrid of a uniform and a discriminatory auction. For winning bids above the average winning bid, buyers are charged the average winning bid, otherwise they pay their respective bids. We report on an experiment that compares this auction format to the discriminatory format, used in most other countries, and to the uniform format. Our design is based on a common value model with multi-unit supply and two-unit demand. The results show significantly higher revenue with the Spanish and the uniform formats than with the discriminatory one, while volatility of prices over time is significantly lower in the discriminatory format than in the Spanish and uniform cases. Actual price dispersion is significantly larger in the discriminatory than in the Spanish. Our data also exhibit the use of bid-spreading strategies in all three designs.

Keywords: Treasury, Spanish auctions, discriminatory auctions, uniform auctions, multi-unit demand, common values, experimental economics

JEL Classification: C92, D44, E42, E58, H63

Suggested Citation

Abbink, Klaus and Brandts, Jordi and Pezanis-Christou, Paul, Auctions for Government Securities: A Laboratory Comparison of Uniform, Discriminatory and Spanish Designs (November 2002). UFAE and IAE Working Paper No. 551.02, Available at SSRN: https://ssrn.com/abstract=367481 or http://dx.doi.org/10.2139/ssrn.367481

Klaus Abbink

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
44-115-95-14768 (Phone)
44-115-95-14159 (Fax)

Jordi Brandts (Contact Author)

Instituto de Analisis Economico (CSIC) Barcelona ( email )

UAB Campus
E-08193 Bellaterra
Spain

Paul Pezanis-Christou

U. of Adelaide School of Economics

Adelaide
Australia

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