Purpose

We estimate the marginal cost curve of each dealer in each auction, based on structural models of the multiunit discriminatory-price auction.

Design/methodology/approach

Auction theory has ambiguous implications regarding the relative performance of three formats of multiunit auctions: uniform-price, discriminatory-price and Vickrey auctions. We evaluate the performance of these three auction formats using bid-level data of the Federal Reserve’s purchase auctions of agency MBS from June 2014 through November 2014.

Findings

Our results suggest that neither uniform-price nor Vickrey auctions outperform discriminatory-price auctions in terms of the total expenditure. However, Vickrey auctions outperform discriminatory-price auctions in terms of efficiency, with the efficiency gain around 0.74% of the surplus that dealers extract on average.

Originality/value

To the best of our knowledge, this paper provides the first structural analysis of the auctions used by the Federal Reserve in implementing its monetary policies.

How gravity causes a perfectly spherical ball to roll down an inclined plane is part of elementary school physics canon. But the world is messier than a textbook.   

Scientists in the Harvard John A. Paulson School of Engineering and Applied Sciences (SEAS) have sought to quantitatively describe the much more complex rolling physics of real-world objects. Led by Professor L. Mahadevan, they combined theory, simulations, and experiments to understand what happens when an imperfect, spherical object is placed on an inclined plane.