While the European Central Bank experienced severe overbidding in the conduct of its fixed-rate operations, the Bank of Japan has not. Theoretical analyses argue that the reason is that the currently accommodative financial environment in Japan has made bidders' objective functions locally satiated. We conduct an experiment with fixed-rate operations and find that, even as participants' initial demands are large, an explosion of bids does not arise if the objective functions are sufficiently satiated. We also estimate the bid functions from the experimental data and a simple calibration based on the functions indicates that fixed-rate operations are vulnerable to overbidding even when some degree of satiation is preserved.
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