CaltechAUTHORS
  A Caltech Library Service

A Reverse Auction for Toxic Assets

Armantier, Olivier and Holt, Charles A. and Plott, Charles R. (2010) A Reverse Auction for Toxic Assets. Social Science Working Paper, 1330. California Institute of Technology , Pasadena, CA. http://resolver.caltech.edu/CaltechAUTHORS:20100928-152231463

[img] PDF - Published Version
See Usage Policy.

247Kb

Use this Persistent URL to link to this item: http://resolver.caltech.edu/CaltechAUTHORS:20100928-152231463

Abstract

The proposed 2008 TARP auction was intended to facilitate rapid purchases by the U.S. department of Treasury of a wide array of mortgage-backed securities in order to remove these “toxic assets” from the portfolios of financially stressed banks. The Treasury had selected a Reference Price design whereby bids to sell different securities would be normalized or “scored” by reference prices that reflect estimates of relative values. Although the auction was suspended just prior to the 2008 Presidential election, we continued with a series of laboratory experiments aimed at evaluating the performance of Reference Price auctions relative to several benchmark conditions. The experimental results indicate that a simple Reference Price auction can be an effective mechanism for avoiding serious effects of adverse selection and strategic bid manipulation, even when reference prices are not set accurately. An econometric analysis of bidding patterns and auction outcomes reveals how underlying behavior produces efficiency differences in this common-value framework.


Item Type:Report or Paper (Working Paper)
Related URLs:
URLURL TypeDescription
http://www.hss.caltech.edu/SSPapers/sswp1330.pdfPublisherUNSPECIFIED
Additional Information:If you are unable to obtain a copy on the web or library contact the Working Paper Coordinator (sswp@hss.caltech.edu) and we will send you a copy.
Group:Social Science Working Papers
Subject Keywords:reverse auction, auction design, common value auction, mortgage backed securities, laboratory experiments
Record Number:CaltechAUTHORS:20100928-152231463
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20100928-152231463
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:20207
Collection:CaltechAUTHORS
Deposited By: Victoria Mason
Deposited On:29 Sep 2010 18:39
Last Modified:26 Dec 2012 12:28

Repository Staff Only: item control page