Informational Advantage and Information Structure: An Analysis of Canadian Treasury Auctions
Several important auction settings, including treasury auctions in Canada and the U.S., have
the feature that some bidders (dealers) observe the bids of a subset of other bidders (customers).
Quantifying the economic advantage that informationally advantaged bidders derive from this institutional
feature requires that we empirically distinguish between private vs. interdependent
values paradigms. Bidders with private values who obtain information about rivals’ bids use this
information to update their beliefs about the distribution of residual supply. With interdependent
values, bidders also update their beliefs about the value of the good being auctioned. We use
these differential updating effects to construct formal hypothesis tests of the presence of private
vs. interdependent values. Using data from Canadian treasury auctions, we cannot reject the null
hypothesis of private values in auctions of 3- and 12-month treasury bills. We also do not find evidence
supporting the alternative hypothesis of interdependent values. We use the estimated model
to quantify the value of observing customer bids to a dealer. We find that the extra information
contained in customers’ bids leads on average to an increase in payoff equal to 13 ? 35% of the
expected surplus of dealers.