Estimating Demand Systems with Bidding Data

Exploiting the fact  that  auctions of related securities or commodities are often held simultaneously, we propose  a method for estimating demand systems, avoiding the usual price endogeneity issues in demand estimation. We implement our method using bidding data from Canadian T-bill auctions, and find that different types of bills are only weak substitutes, despite their cash-like nature. We  illustrate  how demand elasticities, together with the auction format, determine how to  allocate debt on a given day across maturities.