Working Paper: CEPR ID: DP7395
Authors: Paul Klemperer
Abstract: I describe a new static (sealed-bid) auction for differentiated goods - the "Product-Mix Auction". Bidders bid on multiple assets simultaneously, and bidtakers choose supply functions across assets. The auction yields greater efficiency, revenue, information, and trade than running multiple separate auctions. It is also often simpler to use and understand, and less vulnerable to collusion, than a simultaneous multiple round auction. I designed it after the 2007 Northern Rock bank-run to help the Bank of England fight the credit crunch; in 2008 the U.S. Treasury planned using a related design to buy "toxic assets"; it may be used to purchase electricity.
Keywords: central banking; multi-object auction; product mix auction; simultaneous ascending auction; TARP; term auction; treasury auction
JEL Codes: D44; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| product mix auction (D44) | greater efficiency (D61) |
| product mix auction (D44) | greater revenue (H27) |
| simultaneous bidding on multiple assets (D44) | better matching between supply and demand (J23) |
| better matching between supply and demand (J23) | increased overall trade volume (F10) |
| auction design reduces market power (D44) | improved liquidity (G19) |
| improved liquidity (G19) | enhanced revenue (H27) |
| auction design reduces market power (D44) | better information quality (L15) |
| product mix auction reduces risk of collusion (D44) | less vulnerability to collusion (L12) |