Economics faculty have been awarded a $400,000 grant by the National Science Foundation

12 October, 2009

Economics faculty members Lawrence Ausubel, Peter Cramton, Emel Filiz-Ozbay and Erkut Ozbay have been awarded a two-year, $400,000 grant by the National Science Foundation to study “Common-Value Auctions with Liquidity Needs.” 

This project continues research that received national attention last fall, when the four researchers conducted experiments that contrasted different auction methods for purchasing troubled assets in connection with government programs such as the Troubled Asset Relief Program, or TARP. The research will shed new light on how auctions for multiple items with common values perform in practice, particularly comparing the performance of static and dynamic auctions when bidders are financially constrained. Their results will have applications to financial assets -- whose value has a common component across the various bidders -- and to various other important resource-allocation problems. For example, auctions are widely suggested as a way to sell emission allowances as part of a cap-and-trade scheme, which is the favored policy instrument for limiting greenhouse gas emissions. The research will provide new empirical evidence on the performance of sealed-bid versus ascending-bid auctions for these types of applications. The project will make effective use of the new Experimental Economics Lab at the University of Maryland.