@article{70dcdea0d73144939b28b521a5c837d3,
title = "Bid shading and bidder surplus in the US treasury auction system",
abstract = "We analyze bidding data from uniform price auctions of US Treasury bills and notes between July 2009 and October 2013. Primary dealers consistently bid higher yields compared to direct and indirect bidders. We estimate a structural model of bidding that takes into account informational asymmetries introduced by the bidding system employed by the US Treasury. While primary dealers' estimated willingness-to-pay is higher than direct and indirect bidders', their ability to bid-shade is even higher, leading to higher yield/lower price bids. Total bidder surplus averaged to about three basis points across the sample period along with effciency losses around two basis points.",
author = "Ali Horta{\c c}su and Jakub Kastl and Allen Zhang",
note = "Funding Information: * Horta{\c c}su: Department of Economics, University of Chicago 1126 E. 59th Street, Chicago, IL 60637, and NBER (email: hortacsu@uchicago.edu); Kastl: Department of Economics, Princeton University, Fisher Hall, Princeton, NJ 08544, NBER and CEPR (email: jkastl@princeton.edu); Zhang: Model Risk Management, Fannie Mae, 3900 Wisconsin Avenue NW, Washington, DC 20016 (email: allen_zhang@fanniemae.com). This paper was accepted to the AER under the guidance of Pinelopi Goldberg, Coeditor. The views expressed in this paper are those of the authors and should not be interpreted as reflecting the views of the US Department of the Treasury. We thank Philip Haile, Kenneth Hendricks, Darrell Duffie, Paulo Somaini, Terry Belton, and participants of the US Treasury Roundtable, 2015 NBER IO Summer Meetings, and 2015 NBER Market Design Meeting for their valuable comments. Kastl is grateful for the financial support of the NSF (SES-1352305) and the Sloan Foundation, Horta{\c c}su the financial support of the NSF (SES-1124073, ICES-1216083, and SES-1426823). Zhang was an employee of the US Department of the Treasury while the paper was being written. All remaining errors are ours.",
year = "2018",
month = jan,
doi = "10.1257/aer.20160675",
language = "English (US)",
volume = "108",
pages = "147--169",
journal = "American Economic Review",
issn = "0002-8282",
publisher = "American Economic Association",
number = "1",
}