Product Mix
The Product-Mix Auction: a New Auction Design for Differentiated Goods Paul Klemperer Nuffield College, Oxford, OX1 1NF, England paul.klemperer@economics.ox.ac.uk +44 777 623 0123
Journal of the European Economic Association, 2010, 8, forthcoming (first version, 2008)
The most recent public version of this paper is available at http://www.paulklemperer.org 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. (100 words) *[note added June 2010] Although the auction was designed in response to the crisis, the Bank of England wanted a solution that would be used in normal times too: the Bank is now regularly running auctions that correspond closely to the design described in section 2 of this paper; future auctions may use some of the enhancements described in section 3.
Keywords: multi-object auction, TARP, central banking, simultaneous ascending auction, treasury auction, term auction, toxic assets, simultaneous multiple round auction, Product-Mix Auction JEL Nos. D44 (Auctions), E58 (Central Banking) I have advised the Bank of England and the U.S. Treasury and have been consulted by other Central Banks, government agencies, etc., about these issues. I thank the relevant officials for help, but the views here are my own and do not represent those of any organisation. I am very grateful to Jeremy Bulow and Daniel Marszalec for their help in advising the
Journal of the European Economic Association, 2010, 8, forthcoming (first version, 2008)
The most recent public version of this paper is available at http://www.paulklemperer.org 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. (100 words) *[note added June 2010] Although the auction was designed in response to the crisis, the Bank of England wanted a solution that would be used in normal times too: the Bank is now regularly running auctions that correspond closely to the design described in section 2 of this paper; future auctions may use some of the enhancements described in section 3.
Keywords: multi-object auction, TARP, central banking, simultaneous ascending auction, treasury auction, term auction, toxic assets, simultaneous multiple round auction, Product-Mix Auction JEL Nos. D44 (Auctions), E58 (Central Banking) I have advised the Bank of England and the U.S. Treasury and have been consulted by other Central Banks, government agencies, etc., about these issues. I thank the relevant officials for help, but the views here are my own and do not represent those of any organisation. I am very grateful to Jeremy Bulow and Daniel Marszalec for their help in advising the
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