An empirical study of auction revenue rankings: the case of municipal bonds

Using a novel dataset of 386 first-price municipal bond auctions held in California, I perform counterfactual revenue comparisons, based on the theoretical result of Milgrom and Weber (1982). 1 show that the revenue in the second-price auction is nonparametrically identified, and the counterfactual revenue in the English auction can be bounded in an informative way. These results form a basis for nonparametric estimation of counterfactual revenue differences. I find that the revenue gain from using the English auction would be in the range of 11%-19% of the gross underwriting spread, and that most of it would already be captured by using the second-price auction. The recent explosive growth of Internet English auctions, administered by Grant Street Group, provides external support to the claim that auction design matters in this market.