ABSTRACT: The FDIC resolves insolvent banks using a scoring auction. Although the basic structure of the scoring rule is known to bidders, they are uncertain about how the FDIC makes trade-offs between the different components. Uncertainty over the scoring rule motivates bidders to submit multiple bids for the same failed bank. To evaluate the effects of uncertainty and multiple bidding for FDIC costs we develop a methodology for analyzing multidimensional bidding environments where the auctioneer’s scoring weights are unknown to bidders, ex-ante. We estimate private valuations for banks that failed during the great financial crisis and compute counter-factual experiments in which scoring uncertainty is eliminated. Our findings imply a substantial within-sample reduction in FDIC resolution costs of between 29.8% ($8.2Billion) and 44.6% ($12.3Billion). These savings can reduce policy-driven banking sector distortions, since FDIC resolution costs must be covered either through special levies on banks or through loans from the US Treasury.

ABSTRACT:  This article evaluates the impact that facilitated discussions about girls’ education have on education outcomes for students in rural Zimbabwe. The staggered implementation of components of a randomized education project allowed for the causal analysis of a dialogue-based engagement campaign. This campaign involved regular discussions between trained facilitators and parents, teachers, and youth about girls’ rights, the importance of attending school, and the barriers girls face in pursuing education. The campaigns increased mathematics performance and enrollment in the year after implementation. There was no similar improvement in literacy performance during this period. Longer-term data on the broader project suggest that adding additional education-focused interventions did not further increase mathematics performance and enrollment beyond what can be attributable to the dialogue campaigns alone. 

ABSTRACT:  Credit Default Swaps (CDS) are financial derivative products that insure bond investors against firm-default. Determining the payout of these contracts, however, is complicated because the outstanding value of the insurance is larger than the debt outstanding and bond valuations are heterogeneous. CDS payouts are determined in a two-stage auction. In the first stage dealers commit to either supply or purchase a fixed quantity at the unknown final price. Then, the excess supply or demand is announced and a multiunit uniform price auction is held to determine the market clearing price.  Dealers have an incentive to bid strategically; in addition to the standard information rents in multiunit auctions, the two stage auction features (i) learning across rounds, (ii) pre-committment of quantities in the first round, and (iii) heterogeneous positions in CDS contracts. The paper develops and estimates a structural model of bidding behavior in these auctions and uses it to quantify the role of each of these channels in the dynamic auction process. I consider counterfactual changes to the auction format, including a double auction design with step function bidding, which reduces shading in the auction, increasing the insurance coverage.

ABSTRACT: This paper proposes a computational method to solve for Bayes-Nash equilibria in games. It is applicable when the equilibrium can be characterized by a set of necessary conditions that link a distribution of private information (values) and actions (bids). The method allows for the solution of the multi-unit auction game with step-function bids that characterize, for example, electricity and Treasury auctions. The approach avoids challenges associated with direct solution of the strategy functions. Instead, it searches for the set of bid distributions that rationalize the private valuations implied by the equilibrium restrictions of the game. This problem is formalized using indirect inference. A set of simulations studies the performance of this solution method in (i) symmetric first price auctions and (ii) multi-unit auctions. Finally, the solution method is applied to solve for equilibria in a counterfactual uniform price auction for the Turkish Treasury (Hortacsu and McAdams (2010)).

ABSTRACT: We develop a framework for stress-testing the FDIC’s ability to resolve bank-failure waves that allows macroeconomic conditions to endogenously influence costs by altering the composition of failures, eligible bidders, and actual bidders. Our entry model captures the fact that there are many eligible bidders, but only a subset seriously consider bidding, as in many procurement settings. We validate the model by forecasting resolution costs for recent failures whose FDIC-estimated costs are known. We apply it to predict costs of contemporary hypothetical crises (monetary tightening, commercial real estate), and to understand the competition/stability tradeoff of local selling constraints.