Skip to main content

Bid shading and bidder surplus in the US treasury auction system

Author(s): Hortaçsu, A; Kastl, Jakub; Zhang, A

To refer to this page use:
Abstract: We analyze bidding data from uniform price auctions of US Treasury bills and notes between July 2009 and October 2013. Primary dealers consistently bid higher yields compared to direct and indirect bidders. We estimate a structural model of bidding that takes into account informational asymmetries introduced by the bidding system employed by the US Treasury. While primary dealers' estimated willingness-to-pay is higher than direct and indirect bidders', their ability to bid-shade is even higher, leading to higher yield/lower price bids. Total bidder surplus averaged to about three basis points across the sample period along with effciency losses around two basis points.
Publication Date: Jan-2018
Citation: Hortaçsu, A, Kastl, J, Zhang, A. (2018). Bid shading and bidder surplus in the US treasury auction system. American Economic Review, 108 (1), 147 - 169. doi:10.1257/aer.20160675
DOI: doi:10.1257/aer.20160675
ISSN: 0002-8282
Pages: 147 - 169
Type of Material: Journal Article
Journal/Proceeding Title: American Economic Review
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

Items in OAR@Princeton are protected by copyright, with all rights reserved, unless otherwise indicated.