AUCTIONS OF DIVISIBLE GOODS - ON THE RATIONALE FOR THE TREASURY EXPERIMENT

We compare a sealed-bid uniform-price auction (the Treasury's experime ntal format) with a sealed-bid discriminatory auction (the Treasury's format heretofore), assuming the good is perfectly divisible. We show that the auction theory that prompted the experiment, which assumes si ngle-unit demands, does not adequately describe the bidding game for T reasury securities. Collusive strategies are self-enforcing in uniform -price divisible-good auctions. In these equilibria, the seller's expe cted revenue is lower than in equilibria of discriminatory auctions.