Applying auction theory to the toxic-asset rescue plan currently released by the United States Treasury Department, this paper demonstrates an equilibrium where moderately poor bidders outbid rich bidders in such auctions. After defeating their rich rivals and acquiring the toxic assets, such...

 A social planner wishes to launch a project but the contenders capable of running the project are cash-constrained and may default.  To signal their capabilities, the contenders may finance their bids through debt or equity, depending on the mechanism chosen by the social planner.  When...

Applying auction theory to the toxic-asset rescue plan currently released by the United States Treasury Department, this paper demonstrates an equilibrium where moderately poor bidders outbid rich bidders in such auctions. After defeating their rich rivals and acquiring the toxic assets, such...