Product Mix Essay

The Product-Mix Market: a New Market Design to get Differentiated Products Paul Klemperer Nuffield School, Oxford, OX1 1NF, England paul. [email protected] ox. air conditioning unit. uk +44 777 623 0123

Log of the Western Economic Relationship, 2010, eight, forthcoming (first version, 2008) The most recent community version of the paper is available at http://www.paulklemperer.org Abstract I actually describe a new static (sealed-bid) auction to get differentiated goods—the " Product-Mix Auction”. Bidders bid on multiple assets concurrently, and bidtakers choose source functions across assets. The auction produces greater productivity, revenue, info, and transact than jogging multiple independent auctions. It is also often better to use and understand, and less vulnerable to collusion, than a simultaneous multiple round auction. I actually designed this after the 3 years ago Northern Rock and roll bank-run to aid the Bank of England* deal with the credit crunch; in 08 the U. S. Treasury planned using a related design and style to buy " toxic assets”; it may be used to purchase electrical power. (100 words) *[note added Summer 2010] Although the auction was designed reacting to the crisis, the Bank of England wished a solution that could be used in regular times too: the Bank is actually regularly working auctions that correspond carefully to the design and style described in section 2 of this newspaper; future sales may use a few of the enhancements explained in section 3. Keywords: multi-object public auction, TARP, central banking, simultaneous ascending public auction, treasury public auction, term auction, toxic resources, simultaneous multiple round public sale, Product-Mix Public auction JEL Nos. D44 (Auctions), E58 (Central Banking) I possess advised the financial institution of England and the U. S. Treasury and have been contacted by other Central Banks, government agencies, etc ., about these issues. I actually thank the relevant officials to get help, nevertheless the views listed below are my own , nor represent the ones from any company. I are very happy to Jeremy Bulow and Daniel Marszalec for their assist in advising the financial institution of England. I also particularly taken advantage of from conversations with Elizabeth Baldwin and Marco Pagnozzi, and give thanks to Olivier Armantier, Eric Budish, Vince Crawford, Aytek Erdil, Meg Meyer, Moritz Meyer-ter-Vehn, Rakesh Vohra, the manager and unknown referees, and many other friends and colleagues pertaining to helpful advice. © Paul Klemperer 2008, 2009

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How should certainly goods that both seller(s) and potential buyers view since imperfect substitutes be sold, especially when multi-round auctions happen to be impractical? It was the Bank of England's injury in autumn 2007 as the credit crunch started. 1 The Bank urgently wished to supply fluid to banks, and was therefore happy to accept a wider-than-usual array of collateral, however it wanted a correspondingly larger interest rate against any less strong collateral it took. A similar trouble was the U. S. Treasury's autumn 08 Troubled Property Recovery Plan (TARP) decide to spend about $700 billion dollars buying " toxic assets” from between 25, 500 closely-related although distinct sub-prime mortgage-backed securities. Because financial markets maneuver fast, in both instances it was very desirable that any auction take place at a single immediate. In a multi-stage auction bidders who had entered the highest offers early on may possibly change the minds of men about attempting to be winners before the public auction closed, two and the financial markets might themselves be influenced by the evolution of the auction, which usually magnifies the down sides of bidding and invites manipulation. 3 An equivalent is actually that of a firm choosing it is " merchandise mix”: it can supply multiple varieties of a product or service (at several costs), but with a total capacity constraint, to customers based on a preferences between those product varieties, and where deal costs or other time pressures make multiple-round online auctions infeasible. some The different different types of a product may include different points of delivery, different warranties, or several restrictive contrat on make use of. 1

The crisis commenced in...

Sources: Ausubel, Lawrence, and Peter Cramton (2008). " A Troubled Advantage Reverse Public sale. ” mimeo, University of Maryland. Ausubel, Lawrence, Philip Cramton, Emel Filiz-Ozbay, Nathaniel Higgins, Erkut Ozbay, and Andrew Stocking (2008). " Common-Value Auctions with Fluid Needs: An Experimental Evaluation of a Bothered Assets Reverse Auction. " mimeo, University of Baltimore. Back, Kerry, and Jamie Zender (2001). " Auctions of Divisible Goods With Endogenous Supply. ” Economics Letters, 73, 29–34. Budish, Eric (2004). " Internet Auctions to get Close Alternatives. ” School of Oxford M. Phil cannella. thesis. Binmore, Ken and Paul Klemperer (2002). " The Biggest Market Ever: the Sale of the United kingdom 3G Phone system Licenses. ” Economic Journal, 112, C74-C96. Crawford, Vincent P. (2008). " The Flexible-Salary Match: A Proposal to Increase the Salary Flexibility of the Nationwide Resident Coordinating Program. ” Journal of Economic Behavior & Business, 66, (2), 149-160, Might. Crawford, Vincent P., and Elsie Jessica Knoer (1981). " Work Matching with Heterogeneous Companies and Workers. ” Econometrica, 49, 437-450. Gul, Faruk, and Ennio Stacchetti (1999). " Walrasian Equilibrium with Gross Alternatives. ” Log of Economical Theory, 87, 95-124. Kelso, Alexander S. Jr., and Vincent P. Crawford (1982). " Task Matching, Coalition Formation, and Gross Alternatives. " Econometrica, 50, 1483-1504. Klemperer, Paul (1999). " Auction Theory. ” Journal of Economic Surveys, 13 (2), 227-86. Klemperer, Paul (2002). " What Really Matters in Auction Style. ” Journal of Financial Perspectives, 18, 169-189. Klemperer, Paul (2004). Auctions: Theory and Practice, Princeton College or university Press, Princeton, US.

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Klemperer, Paul (2008). " A New Public sale for Substitutes: Central Traditional bank Liquidity Online auctions, the U. S. TARP, and Variable Product-Mix Online auctions. ” mimeo, Oxford College or university. Klemperer, Paul and Margaret Meyer (1986). " Value Competition or Quantity Competition: The Function of Doubt. ”Rand Journal of Economics, 17, 618-638. Klemperer, Paul and Maggie Meyer (1989). " Supply Function Equilibria in Oligopoly under Doubt, ” Econometrica, 57, 1243-1277. Kremer, Ilan, and Kjell Nyborg (2004). " Underpricing and Marketplace Power in Uniform Value Auctions. ” Review of Economical Studies, 17, 849-877. Krishna, Vijay (2002). Auction Theory. New York, BIG APPLE: Academic Press, US. McAdams, David (2007). " Uniform-Price Auctions with Adjustable Supply. ” Economics Letters, 96, 48-53. Manelli, Alejandro Meters. and Daniel Vincent (1995). " Ideal Procurement Mechanisms. ” Econometrica, 63, 591-620. Menezes, Flavio M. and Paulo K. Monteiro (2005). An Introduction to Auction Theory. Oxford, UK: Oxford College or university Press. Milgrom, Paul (2000). " Putting Auction Theory to Function: The Sychronizeds Ascending Market. ” Record of Personal Economy, 108, 245-272. Milgrom, Paul 3rd there’s r. (2004). Adding Auction Theory to Function. Cambridge, UK: Cambridge University or college Press. Milgrom, Paul (2009). " Project Messages and Exchanges. ” American Monetary Journal: Microeconomics, 1, 95-113. Poole, Bill (1970). " Optimal Selection of Monetary Coverage Instruments within a Simple Stochastic Macro Model. ” Quarterly Journal of Economics, 84, 197-216. Weitzman, Martin (1974). " Rates vs . Amounts. " Report on Economic Research, 41, 477-491.

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