Uncertainty, Collusion and Returns in a Multiple-Bid, Multiple-Unit Auction with Resale

This paper analyses bidding behaviour in the Mexican Treasury debt auction for the period 1986-9. Auction rules closely resemble those of the US Treasury auction: bidders submit multiple bids for multiple units. The majority of purchased quantities are immediately resold. Results suggest collusion among the six largest bidders, who on average purchase 75% of new government debt issues. Results also suggest information asymmetries between these six bidders and remaining participants. The majority of bidders account for the winner's curse. Measures of resale risk and ex ante information disparities among bidders explain cross- sectional variation in downward biases of winning bids as estimates of resale values. Cross-sectional analysis also suggests a positive correlation between the magnitudes of pre- specified maxima of non-competitive bids and auction revenues.