# Non-competitive bids and single price auction

In the modified dutch auction (also called single price auction), non competitive bids are reduced and then single price is arrived at.

Consider 35 billion dollars T-bills are to be auctioned off. Non-competitive bids are submitted for 5. Following is the table for competitive bids:-

Disc% Face value Cumulative FV

.1081 3 3

.1090 12 15

.1098 8 23

.1104 5 28

.1117 8 36

.1124 7 43

Now, if we reduce 5 from 35, we get 30. Till 28, the rate is .1104. So, all bidders should have got a discount of .1104. However, as 2 billion dollars are still left, we consider the higher discount of .1117.

Hence, is the single rate of .1117 the final discount for all bids - competitive and non-competitive. What is the significance of non-competitive bids? Is it that we reduce 5 and then consider the rates. This should mean that had the bids been like this, things would have been different?

Disc% Face value Cumulative FV

.1081 3 3

.1090 12 15

.1098 8 23

.1104 8 31

.1117 8 39

.1124 7 46

So, .1104 would have been the single price?