Boerner, Lars, van Bochove, Christiaan and Quint, Daniel (2012) Anglo-Dutch premium auctions in eighteenth-century Amsterdam. In: Modern and Comparative seminar, 2012-11-22, London, United Kingdom, GBR.
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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 |
| Divisions: | Economic History |
| Subjects: | H Social Sciences > HC Economic History and Conditions |
| JEL classification: | D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions N - Economic History > N2 - Financial Markets and Institutions > N23 - Europe: Pre-1913 |
| Date Deposited: | 21 Nov 2012 09:41 |
| Last Modified: | 13 Sep 2024 14:10 |
| URI: | http://eprints.lse.ac.uk/id/eprint/47465 |
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