## Auctions: Theory and Possible Applications to Economies in Transition

_IMF Working Papers, February 1, 1993_

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**Canonical URL:** [Auctions: Theory and Possible Applications to Economies in Transition](https://www.imf.org/en/publications/wp/issues/2016/12/30/auctions-theory-and-possible-applications-to-economies-in-transition-1018)

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## Bibliographic details
- Authors: Rajnish Mehra, Robert A Feldman
- Published: February 1, 1993
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451842838.001

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### Summary and Context
- A major effort is taking place in many parts of the world to establish market-oriented institutions, particularly evident in the transforming economies in Eastern Europe and the republics of the former Soviet Union.
- The paper assesses various auction techniques to price and allocate:
  - government securities,
  - refinance credit,
  - foreign exchange,
  - state assets in the context of privatization programs.
- Before recommendations on auction formats, the paper explains basic auction formats and assesses advantages and disadvantages drawing on the existing, and mostly theoretical, literature.

### Main Assessments and Findings
- Assesses various auction techniques for pricing and allocation of financial instruments and state assets in transition economies.
- Draws on auctions literature to evaluate:
  - auction format,
  - auction mechanism,
  - auction participant behavior,
  - bid auction types (sealed-bid auction, second-price auction),
  - uniform-price auction and marginal-price auction characteristics,
  - mechanisms concern such as price dampening effect.

### Auction Formats and Theoretical Considerations
- The paper explains basic auction formats and assesses advantages and disadvantages of these formats based on the existing literature, which is described as mostly theoretical.
- Auction types and concepts explicitly discussed:
  - sealed-bid auction,
  - second-price auction,
  - uniform-price auction,
  - marginal-price auction,
  - issues of auction mechanism design and auction participant incentives,
  - price dampening effect.

### Policy Applications and Recommendations (Contextual)
- Focuses on applications of auction techniques to:
  - pricing and allocation of government securities,
  - refinancing credit operations,
  - foreign exchange allocation,
  - sale of state assets under privatization programs.
- Recommendations are grounded in the paper’s explanation of auction formats and the assessment of their pros and cons for transition economies.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/auctions-theory-and-possible-applications-to-economies-in-transition-1018_