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Full-Text Articles in Business
A Two-Sided Auction For Legacy Loans, Peter Cramton
A Two-Sided Auction For Legacy Loans, Peter Cramton
Peter Cramton
On Monday, 23 March 2009, Treasury Secretary Geithner presented the Public-Private Investment Program as a key instrument to resolve the financial crisis (www.financialstability.gov). The Treasury’s description still leaves many issues unanswered. We flesh out the auction design for legacy loans. A two-sided auction is required. Both banks and private investors must compete in a transparent and competitive process.
Auctions For Injecting Bank Capital (Addendum To 'A Troubled Asset Reverse Auction'), Peter Cramton, Lawrence M. Ausubel
Auctions For Injecting Bank Capital (Addendum To 'A Troubled Asset Reverse Auction'), Peter Cramton, Lawrence M. Ausubel
Peter Cramton
Public discussion has turned, in the past few days, toward using some of the $700 billion in rescue funds for the injection of government money into banks in return for ownership stakes. The purpose of this short note, an addendum to “A Troubled Asset Reverse Auction,” is to describe an auction mechanism suitable for injections of capital into banks. The auctions would price the equity purchases through a competitive process.
A Troubled Asset Reverse Auction, Peter Cramton, Lawrence M. Ausubel
A Troubled Asset Reverse Auction, Peter Cramton, Lawrence M. Ausubel
Peter Cramton
The US Treasury has proposed purchasing $700 billion of troubled assets to restore liquidity and solve the current financial crisis, using market mechanisms such as reverse auctions where appropriate. This paper presents a high-level design for a troubled asset reverse auction and discusses the auction design issues. We assume that the key objectives of the auction are to: 1) provide a quick and effective means to purchase troubled assets and increase liquidity; 2) protect the taxpayer by yielding a price for assets related to their value; and 3) offer a transparent rules-based process that minimizes discretion and favoritism. We propose …
An Overview Of Combinatorial Auctions, Peter Cramton, Yoav Shoham, Richard Steinberg
An Overview Of Combinatorial Auctions, Peter Cramton, Yoav Shoham, Richard Steinberg
Peter Cramton
No abstract provided.
Combinatorial Auctions, Peter Cramton, Yoav Shoham, Richard Steinberg
Combinatorial Auctions, Peter Cramton, Yoav Shoham, Richard Steinberg
Peter Cramton
A comprehensive book on combinatorial auctions―auctions in which bidders can bid on packages of items. The book consists of original material intended for researchers, students, and practitioners of auction design. It includes a foreword by Vernon Smith, an introduction to combinatorial auctions, and twenty-three cross-referenced chapters in five parts. Part I covers mechanisms, such as the Vickrey auction and the ascending proxy auction. Part II is on bidding and efficiency issues. Part III examines computational issues and algorithmic considerations, especially the winner determination problem―how to identify the (tentative) winning set of bids that maximizes revenue. Part IV discusses implementation and …
Demand Reduction And Inefficiency In Multi-Unit Auctions, Peter Cramton, Lawrence M. Ausubel
Demand Reduction And Inefficiency In Multi-Unit Auctions, Peter Cramton, Lawrence M. Ausubel
Peter Cramton
Auctions typically involve the sale of many related goods. Treasury, spectrum and electricity auctions are examples. In auctions where bidders pay the market-clearing price for items won, large bidders have an incentive to reduce demand in order to pay less for their winnings. This incentive creates an inefficiency in multiple-item auctions. Large bidders reduce demand for additional items and so sometimes lose to smaller bidders with lower values. We demonstrate this inefficiency in an auction model which allows interdependent values. We also establish that the ranking of the uniform-price and pay-as-bid auctions is ambiguous in both revenue and efficiency terms. …
Auctioning Securities, Peter Cramton, Lawrence M. Ausubel
Auctioning Securities, Peter Cramton, Lawrence M. Ausubel
Peter Cramton
Treasury debt and other divisible securities are traditionally sold in either a pay-your-bid (discriminatory) auction or a uniform-price auction. We compare these auction formats with a Vickrey auction and also with two ascending-bid auctions. The Vickrey auction and the alternative ascending-bid auction (Ausubel 1996) have important theoretical advantages for sellers. In a setting without private information, these auctions achieve the maximal revenue as a unique equilibrium in dominant strategies. In contrast, the pay-your-bid, uniform-price, and standard ascending-bid auction admit a multiplicity of equilibria that yield low revenues for the seller. We show how these results extend to a setting where …
Auctions And Takeovers, Peter Cramton
Auctions And Takeovers, Peter Cramton
Peter Cramton
Under Delaware law (the predominant corporate law in the US), when a potential acquirer makes a serious bid for a target, the target's board of directors is required to act as would "auctioneers charged with getting the best price for the stock-holders at a sale of the company." (Revlon v. MacAndrews & Forbes, 173). The target's board may not use defensive tactics that destroy the auction process and must attempt to seek higher bids. Similarly, the Williams Act requires takeover bids to remain open for at least 20 business days on the grounds that the delay facilitates auctions. This preference …
Relational Investing And Agency Theory, Peter Cramton, Ian Ayres
Relational Investing And Agency Theory, Peter Cramton, Ian Ayres
Peter Cramton
This Article analyzes how, and when, corporate governance could be improved by utilizing "relational investing." The term relational investing is just coming into vogue and there does not yet seem to be a consensus on what it means. Although the term has been trumpeted on the cover of Business Week, before the Conference on Relational Investing at Columbia University, relatively little legal writing had been published on the subject. For the purposes of this Article, we define relational investing to encompass commitments to buy and hold significant blocks of a corporation's stock. And it is particularly important that the relational …