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This paper studies Anglo-Dutch premium auctions used in the secondary market
for financial securities in eighteenth-century Amsterdam, Europe's financial
capital at the time. An Anglo-Dutch premium auction consists of an English
auction followed by a Dutch auction, with a cash premium paid to the winner of
the first round regardless of the second-round outcome. To rationalize the
introduction and continued use of this auction format, we need to determine
whether bidding behavior was consistent with equilibrium play. We model this
auction format theoretically, and show that the likelihood of a bid in the
second round should be higher when there is greater uncertainty about the
value of the security being sold. We then test this prediction on data from
16,854 securities sold at auction on 469 days over an 18-year period in the
late 1700s; using several different proxies for the uncertainty of a given
security's value, we find support for this theoretical prediction
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