Bid shading and bidder surplus in the US treasury auction system

Ali Hortaçsu, Jakub Kastl, Allen Zhang

Research output: Contribution to journalArticlepeer-review

34 Scopus citations


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.

Original languageEnglish (US)
Pages (from-to)147-169
Number of pages23
JournalAmerican Economic Review
Issue number1
StatePublished - Jan 2018

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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