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Rev Fin 1996; 9:757-785
© 1996 the Society for Financial Studies

Article

Collusion in uniform-price auctions: experimental evidence and implication for treasury auctions

G Goswami1, TH Noe2 and MJ Rebello3
1 Fordham University
2 Georgia State University and Federal Reserve Bank of Atlanta, USA
3 Georgia State University, USA

Abstract

We provide experimental evidence that nonbinding preplay communication between bidders in auctions of shares facilitates the adoption of equilibrium strategies: collusive strategies in uniform-price auctions, and the unique equilibrium in undominated strategies in discriminatory auctions. When communication between bidders is introduced, clearing prices and auctioneer profits in uniform-price auctions fall below those observed in discriminatory auctions. This evidence suggests that uniform-price auctions of Treasury securities may result in lower revenues than the currently employed discriminatory procedure.


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