Cookies?
Library Header Image
LSE Research Online LSE Library Services

Anglo-Dutch premium auctions in eighteenth-century Amsterdam

Boerner, Lars, van Bochove, Christiaan and Quint, Daniel (2012) Anglo-Dutch premium auctions in eighteenth-century Amsterdam. In: Modern and Comparative seminar, 22 Nov 2012, London, UK.

[img]
Preview
PDF
Download (1147Kb) | Preview

Abstract

An Anglo-Dutch premium auction consists of an English auction followed by a Dutch auction, with a cash premium paid to the winner of the first round. We study such auctions used in the secondary debt market in eighteenth-century Amsterdam. This was among the first uses of auctions, or any structured market-clearing mechanism, in a financial market. We find that this market presented two distinct challenges - generating competition and aggregating information. We argue that the Anglo-Dutch premium auction is particularly well-suited to do both. Modeling equilibrium play theoretically, we predict a positive relationship between the uncertainty in a security's value and the likelihood of a second-round bid. Analyzing data on 16,854 securities sold in the late 1700s, we find empirical support for this prediction. This suggests that bidding behavior may have been consistent with (non-cooperative) equilibrium play, and therefore that these auctions were successful at generating competition. We also find evidence suggesting that these auctions succeeded at aggregating information. Thus, the Anglo-Dutch premium auction appears to have been an effective solution to a complex early market design problem.

Item Type: Conference or Workshop Item (Paper)
Official URL: http://www2.lse.ac.uk/economicHistory/home.aspx
Additional Information: © 2012 The Authors
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
Journal of Economic Literature Classification System: D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions
N - Economic History > N2 - Financial Markets and Institutions > N23 - Europe: Pre-1913
Sets: Departments > Economic History
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 21 Nov 2012 09:41
URL: http://eprints.lse.ac.uk/47465/

Actions (login required)

Record administration - authorised staff only Record administration - authorised staff only

Downloads

Downloads per month over past year

View more statistics