AN EMPIRICAL-STUDY OF THE MEXICAN TREASURY BILL AUCTION

This paper analyzes bidding behavior in Mexican Treasury bill auctions for the period 1986-1991. The Mexican auction rules resemble those used in U.S. Treasury bill auctions closely. Results suggest the presence of collusion among large bidders throughout a large portion of the sampling period and the presence of information asymmetries between small and large bidders. Results also suggest that bidders account for the winner's curse and that participants bid more cautiously when uncertainty is high. Bidders' profits fell dramatically in 1990 when the Treasury substituted uniform for discriminatory pricing to combat collusion and to increase auction revenues.