Pay-as-bid auctions in theory and practice
Florence : European University Institute, 2018, EUI, ECO, PhD Thesis
WITTWER, Milena, Pay-as-bid auctions in theory and practice, Florence : European University Institute, 2018, EUI, ECO, PhD Thesis - https://hdl.handle.net/1814/57444
Retrieved from Cadmus, EUI Research Repository
The pay-as-bid auction, also called the discriminatory price auction, is among the most common auction formats to price and allocate assets and commodities. Trillions of dollars each year are traded in pay-as-bid auctions. The format is the natural multiunit extension of the ﬁrst-price auction of a single item. Bidders specify a price for each unit they want to buy. The market clears at the price where supply intersects aggregate demand and winning bidders pay their bids for each unit won. In the ﬁrst chapter of my thesis, I explain strategic diﬀerences and similarities between the single-item and multi-unit case. In practice, it is rare that multi-unit auctions take place in isolation. The second chapter introduces a model of interconnected pay-as-bid auctions. The auctions run in parallel and oﬀer perfectly divisible substitute goods to the same set of symmetrically informed bidders with multi-unit demand. This connects the demand side of both auctions. The supply side is linked because the total amounts for sale may be correlated. I show that there exists a unique symmetric Bayesian Nash equilibrium when the marginal distributions of supply have weakly decreasing hazard rates. I then develop practical policy recommendations on how to exploit the interconnection across auctions to increase revenues. These theoretic insights are the basis for the ﬁnal chapter of my thesis. In collaboration with Jason Allen (Bank of Canada) and Jakub Kastl (Princeton University) I use data from auctions of Canadian debt to quantify the extent to which demands for securities with diﬀerent maturities are interdependent. Generalizing methods for estimating demand schedules from bidding data to allow for interdependencies, our results suggest that 3, 6 and 12-month bills are often complementary in the primary market for Treasury bills. We present a model that captures the interplay between the primary and secondary markets to provide a rationale for our ﬁndings.
Table of Contents:
-- 1. Pay-as-bid vs. First-price auctions Similarities and differences in strategic behavior -- 2. I nterconnected Pay-As-Bid Auctions -- 3. I dentifying Dependencies in the Demand for Government Securities -- 4. APPENDIX
Defence date: 26 July 2018; Examining Board: Prof. David K. Levine, EUI (Supervisor); Prof. Peter Cramton, University of Cologne; Prof. Salvatore Modica, University of Palermo; Prof. Robert Wilson, Stanford Business School
Cadmus permanent link: https://hdl.handle.net/1814/57444
Full-text via DOI: 10.2870/355900
Series/Number: EUI; ECO; PhD Thesis
Publisher: European University Institute
LC Subject Heading: Auctions; Capital assets pricing model.