On May 22nd at 4:30 in Steitz 102, Dan Quint will speak on the subject in the title, closing this year’s inaugural Economics Colloquium series with a bang. He is Assistant Professor of Economics at the University of Wisconsin – Madison. His work on auctions and bargaining has appeared in leading economic theory journals.His undergraduate degree is from Harvard University (Mathematics), and he received his PhD in Economics from Stanford University. Professor Quint will present his work on an interesting auction format used in eighteenth-century Amsterdam. He will focus both on the historical facts and the auction theoretic analysis. Abstract for his paper is below the fold.
This paper studies Anglo-Dutch premium auctions used in the secondary market for financial securities in eighteenth-century Amsterdam, Europe’s financial capital at the time. An Anglo-Dutch premium auction consists of an English auction followed by a Dutch auction, with a cash premium paid to the winner of the first round regardless of the second-round outcome. To rationalize the introduction and continued use of this auction format, we need to determine whether bidding behavior was consistent with equilibrium play. We model this auction format theoretically, and show that the likelihood of a bid in the second round should be higher when there is greater uncertainty about the value of the security being sold. We then test this prediction on data from 16,854 securities sold at auction on 469 days over an 18-year period in the late 1700s; using several different proxies for the uncertainty of a given security’s value, we find support for this theoretical prediction.