The expected stop-out price in a discriminating auction

Spindt, Paul A.; Stolz, Richard W.

doi:10.1016/0165-1765(89)90186-9

Cited by 7 publications

(3 citation statements)

References 5 publications

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“…Until recently, analysts of applied multi-unit auctions often avoided to model the auction as a game and instead analysed bidders' optimal strategy, assuming a given probability distribution of being awarded the demanded items.% However, Maskin and Riley (1989) have generalized the theory of optimal auctions to include the multi-unit case. And Spindt and Stolz (1989) showed that as the number of bidders or the quantity put up for auction is increased, the expected stop-out price (the lowest price served) goes up which generalizes well-known properties of single-unit auctions.…”

Section: Removing Symmetrymentioning

confidence: 71%

Auctions: An Introduction

Wolfstetter

1996

Journal of Economic Surveys

255

111

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This is a detailed introduction to auction theory. It begins with a simple analysis of standard auctions and then uses a strikingly simple general solution of symmetric private values auctions to prove the payoff equivalence of many auction rules. The basic framework is then modified to admit risk aversion, multi-unit and repeated auctions as well as collusion. Then follows an introduction to optimal auctions, with and without stochastic entry, and to common value auctions and the winner's curse problem. The survey closes with a sample of applications, from the regulation of natural monopolies to price competition in oligopoly and the government securities market.

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Section: Removing Symmetrymentioning

confidence: 71%

Auctions: An Introduction

Wolfstetter

1996

Journal of Economic Surveys

255

111

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“…The treasury auction literature provides many examples in which higher securities issuance (relative to amounts bids) crowd out smaller, fragmented investors and increase the market power of larger more sophisticated bidders. For a simple game‐theoretic theoretical argument, developed in the context of discriminatory price auctions, see Spindt and Stolz (1989). For a recent empirical contribution on Italian treasury auctions, see Paccini (2007).…”

Section: Empirical Observations From Tanzania's T‐bill Marketmentioning

confidence: 99%

High and Volatile Treasury Yields in Tanzania: The Role of Strategic Bidding and Auction Microstructure

Abbas

Sobolev

2009

South African J Economics

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The observed increase in the level and volatility of Tanzania's Treasury yields in recent years against an otherwise benign macroeconomic backdrop presented a puzzle for policymakers, while raising concerns about the fiscal burden of rising debt interest payments and diversion of bank credit away from the private sector. Using evidence from bid-level data, and supported by a simple theorising of bidder incentives under unorthodox issuance practices, this paper traces the recent volatility in yields to the emergence of a sharp segmentation of the T-bill market between sophisticated financial market players (foreign-controlled banks) and a less-experienced group of investors (domestic pension funds and small banks). An important policy recommendation that emerges is that public debt managers should avoid micro-managing Treasury bill auctions by issuing amounts in excess of those offered or by dipping into oversubscribed segments of the yield curve, as such practices seriously disadvantage the less-sophisticated (but more competitive) investors vis-à-vis the more sophisticated players. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 Economic Society of South Africa.

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“…This paper relates to a limited literature that studies the relationship between auction outcomes and secondary market yields. Spindt and Stolz (1989) develop a model in which the expected stop-out price in a discriminatory auction depends on the bid-to-cover ratio. An increase in the number of bidders raises the bid-to-cover ratio and results in a higher stop-out price.…”

Section: Introductionmentioning

confidence: 99%