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

Author

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  • Gautam Goswami
  • Thomas H. Noe
  • Michael J. Rebello

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.

Suggested Citation

  • Gautam Goswami & Thomas H. Noe & Michael J. Rebello, 1995. "Collusion in uniform-price auctions: experimental evidence and implications for Treasury auctions," FRB Atlanta Working Paper 95-5, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:95-5
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    References listed on IDEAS

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    Keywords

    Government securities; Treasury bills;

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