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Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page The Auctions of Swiss Government Bonds: Should the Treasury Price Discriminate or Not?
Daniel Heller and Yvan Lengwiler

Abstract: Ever since Friedman's (1960) contribution, there has been an ongoing controversy about whether the Treasury should auction off its government debt with a discriminatory or with a uniform price format. Many industrialized countries, the United States or Germany, for instance, use discriminatory auctions, while Switzerland applies to uniform price rule. Using recent contributions to multi-unit auction theory, we analyze data on the bids submitted to Swiss Treasury bond auctions over the last three years. We then construct hypothetical bid functions that would occur under price discrimination. Based on these bid functions, we determine which auction format minimizes the government's costs of financing its debt.

Keywords: Government bonds, multi-unit auctions, price discrimination, uniform price

Full paper (225 KB PDF) | Full paper (286 KB Postscript)

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Last update: March 3, 1998