nep-des New Economics Papers
on Economic Design
Issue of 2018‒01‒29
three papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Bid Shading and Bidder Surplus in the U.S. Treasury Auction System By Ali Hortaçsu; Jakub Kastl; Allen Zhang
  2. The discrete Kuhn-Tucker theorem and its application to auctions By Yokote, Koji
  3. Application of the discrete separation theorem to auctions By Yokote, Koji

  1. By: Ali Hortaçsu; Jakub Kastl; Allen Zhang
    Abstract: We analyze bidding data from uniform price auctions of U.S. Treasury bills and notes between July 2009-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 U.S. 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 3 basis points across the sample period along with efficiency losses around 2 basis points.
    JEL: G12 L1
    Date: 2017–11
  2. By: Yokote, Koji
    Abstract: Using a notion of convexity in discrete convex analysis, we introduce a discrete analogue of the Kuhn-Tucker theorem. We apply it to an auction model and show that existing iterative auctions can be viewed as the process of finding a saddle point of the Lagrange function.
    Keywords: Auctions; Discrete convex analysis; Kuhn-Tucker theorem
    JEL: C78 D44
    Date: 2018–01–10
  3. By: Yokote, Koji
    Abstract: The separation theorem in discrete convex analysis states that two disjoint discrete convex sets can be separated by a hyperplane with a 0-1 normal vector. We apply this theorem to an auction model and provide a unified approach to existing results. When p is not an equilibrium price vector, i.e., aggregate demand and aggregate supply are disjoint, the separation theorem indicates the existence of excess demand/supply. This observation yields a refined analysis of a characterization of competitive price vectors by Gul and Stacchetti (2000). Adjusting the prices of items in excess demand/supply corresponds to Ausubel's (2006) auction.
    Keywords: Discrete convex analysis, Separation theorem, Hall's theorem, Auction
    JEL: C78 D44
    Date: 2017–11–23

This nep-des issue is ©2018 by Guillaume Haeringer and Alex Teytelboym. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.