Improving selling of Treasury Bills

Abstract

There is a renewed interest in studying the optimal procedure to sell Treasury Bills. This debate, which has its roots in Milton Friedman's proposal to use uniform-price auctions (Friedman, 1960), has concentrated on the advantages of the uniform versus the discriminatory-price auction. In a uniform-price auction, bids (which include both price and quantity) are ordered by price, from the highest to the lowest. The auctioneer accepts quantities up to the amount it is selling, but all winners pay the price equivalent to the highest losing bid. In a discriminatory-price auction, bids are ordered similarly, but each agent pays the price she bid.