Collusion in uniform-price auctions: Experimental evidence and implications for Treasury auctions

Noe, Thomas, Rebello, Michael and Goswami, Gautam (1996) Collusion in uniform-price auctions: Experimental evidence and implications for Treasury auctions. The Review of Financial Studies, 9 (3). pp. 757-785.

Abstract

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 bidders' gains are equal to the smallest "tick size" in the bidding schedule. This evidence suggests that uniform-price auctions of Treasury securities may result in lower revenues than the currently employed discriminatory procedure.

Item Type: Article
Keywords: price fixing; auctions; finance
Subject(s): Finance
Date Deposited: 10 Nov 2011 15:17
Last Modified: 02 Mar 2017 11:05
Funders: N/A
URI: http://eureka.sbs.ox.ac.uk/id/eprint/1133

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