Common-Value Auctions with Liquidity Needs: An Experimental Test of a Troubled Assets Reverse Auctions
Emel Filiz Ozbay, Lawrence M. Ausubel, Peter Cramton, Nathaniel Higgins, Erkut Y. Ozbay, and Andrew Stocking
,
Handbook of Market Design, ed. by Nir Vulkan, Alvin E. Roth, and Zvika Neeman
May
2011
liquidity.pdf1.06 MB
Abstract
We report the results of an experimental test of alternative auction designs suitable for pricing and removing troubled assets from banks’ balance sheets as part of the financial rescue planned by the U.S. Department of Treasury in the fall of 2008. All auction mechanisms tested here are structured so that many individual securities or pools of securities are auctioned simultaneously. Securities that are widely held are purchased in auctions for individual securities; securities with concentrated ownership are purchased as pools of related securities.