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Social and Behavioral Sciences Commons

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SelectedWorks

Market Design

Finance

2008

Articles 1 - 11 of 11

Full-Text Articles in Social and Behavioral Sciences

Report On Key Design Elements Of Auctions Under Australia's Carbon Pollution Reduction Scheme, Peter Cramton Oct 2008

Report On Key Design Elements Of Auctions Under Australia's Carbon Pollution Reduction Scheme, Peter Cramton

Peter Cramton

No abstract provided.


Auctions For Injecting Bank Capital (Addendum To 'A Troubled Asset Reverse Auction'), Peter Cramton, Lawrence M. Ausubel Oct 2008

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.


Auctioning Long-Term Gas Contracts In Colombia, Peter Cramton Sep 2008

Auctioning Long-Term Gas Contracts In Colombia, Peter Cramton

Peter Cramton

This paper presents an approach to auctioning long-term gas contracts in Colombia. I propose an annual auction for long-term firm gas contracts. The auction would assign and price all firm gas contracts, with the exception of gas from the Guajira field, which is assigned administratively at a regulated price. The proposal is a partial market design in that it does not address the transportation of gas from producer to consumer.

The goal of the approach is to improve the transparency and efficiency of the gas market with a coordinated auction for long-term gas contracts. Currently, gas contracts are sold in ...


A Review Of The L-Band Auction, Peter Cramton Sep 2008

A Review Of The L-Band Auction, Peter Cramton

Peter Cramton

In May 2008, Ofcom’s L-band auction concluded. This was Ofcom’s second combinatorial clock auction. The auction used an innovative format intended to encourage an efficient assignment of the 17 lots. Eight bidders competed for the lots. In sharp contrast to the first combinatorial clock auction, the 10-40 GHz auction, in which each of the ten bidders won spectrum, in the L-band auction there was a single winner—Qualcomm won all the lots. This note briefly reviews the auction.


A Troubled Asset Reverse Auction, Peter Cramton, Lawrence M. Ausubel Sep 2008

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 ...


The Quadratic Core-Selecting Payment Rule For Combinatorial Auctions, Peter Cramton, Robert Day Sep 2008

The Quadratic Core-Selecting Payment Rule For Combinatorial Auctions, Peter Cramton, Robert Day

Peter Cramton

We report on the use of a quadratic programming technique in recent and upcoming spectrum auctions in Europe, and proposed for use in the FAA’s landing-slot auctions in the United States. Specifically, we compute a unique point “in the core” that minimizes the sum of squared deviations from the Vickrey-Clarke-Groves payments. Analyzing the Karush-Kuhn-Tucker conditions, we demonstrate that the resulting payments can be decomposed into a series of economically meaningful and equitable penalties, adding to the perceived “fairness” of this payment rule. Further, we discuss the many benefits of this combinatorial auction paradigm.


A Review Of The 10-40 Ghz Auction, Peter Cramton Sep 2008

A Review Of The 10-40 Ghz Auction, Peter Cramton

Peter Cramton

In February 2008, Ofcom’s 10-40 GHz auction concluded. This was Ofcom’s first combinatorial clock auction. The auction used an innovative format intended to encourage an efficient assignment of the 27 lots. Each of the ten bidders won one or more lots. All 27 lots were assigned. This note briefly reviews the auction.


Market Design: Auctions And Matching, Peter Cramton Jan 2008

Market Design: Auctions And Matching, Peter Cramton

Peter Cramton

No abstract provided.


Innovation And Market Design, Peter Cramton Jan 2008

Innovation And Market Design, Peter Cramton

Peter Cramton

Market design plays an essential role in promoting innovation. I examine emission allowance auctions, airport slot auctions, spectrum auctions, and electricity markets, and demonstrate how the market design can encourage innovation. Improved pricing information is one source of innovation. Enhancing competition is another driver of innovation seen in all of the applications. Market design fosters innovation in other ways as well by addressing other potential market failures.


Forward Reliability Markets: Less Risk, Less Market Power, More Efficiency, Peter Cramton, Steven Stoft Jan 2008

Forward Reliability Markets: Less Risk, Less Market Power, More Efficiency, Peter Cramton, Steven Stoft

Peter Cramton

A forward reliability market is presented. The market coordinates new entry through the forward procurement of reliability options—physical capacity bundled with a financial option to supply energy above a strike price. The market assures adequate generating resources and prices capacity from the bids of competitive new entry in an annual auction. Efficient performance incentives are maintained from a load-following obligation to supply energy above the strike price. The capacity payment fully hedges load from high spot prices, and reduces supplier risk as well. Market power is reduced in the spot market, since suppliers enter the spot market with a ...


The Effect Of Incumbent Bidding In Set-Aside Auctions: An Analysis Of Prices In The Closed And Open Segments Of Fcc Auction 35, Peter Cramton, Allan T. Ingraham, Hal J. Singer Jan 2008

The Effect Of Incumbent Bidding In Set-Aside Auctions: An Analysis Of Prices In The Closed And Open Segments Of Fcc Auction 35, Peter Cramton, Allan T. Ingraham, Hal J. Singer

Peter Cramton

This paper examines the impact of an incumbent carrier’s participation in two simultaneously conducted auctions: one set-aside for non-incumbents and one open to all carriers. This paper estimates the extent to which prices in the closed auction were inflated by the participation of incumbents. This paper also estimates what prices would have been in the open auction had incumbents been excluded from bidding in the closed. It is found that an incumbent’s participation in the closed auction through a front, Alaska Native, enabled it to win more licenses at lower prices in FCC Auction 35. In contrast, non-incumbents ...