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Competition in Treasury Auctions

American Economic Journal: Microeconomics, Vol. 11, Issue 1, pp. 157-184

Authors:
Helmut Elsinger,
Philipp Schmidt-Dengler,
Christine Zulehner
Research Area:
Law and Finance
Date:
Feb 2019
Keywords:
treasury auctions, multi-unit auctions, independent private values, competition, bidder surplus, auction format
Abstract:

We investigate the role of competition on the outcome of Austrian Treasury auctions. Austria's EU accession led to an increase in the number of banks participating in treasury auctions. We use structural estimates of bidders' private values to examine the effect of increased competition on auction performance. We find robust evidence that bidders' surplus dropped sharply after EU accession, but less than reduced form estimates would suggest. The difference can be explained by reduced form estimates not taking into account the increase in valuations upon EU accession.

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