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Bidding with Securities: Comment

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  • Yeon-Koo Che
  • Jinwoo Kim

Abstract

Peter DeMarzo, Ilan Kremer, and Andrzej Skrzypacz (2005) analyzed auctions in which bidders compete in securities. They show that a steeper security leads to a higher expected revenue for the seller, and also use this to establish the revenue ranking between standard auctions. In this comment, we obtain the opposite results to DKS's by assuming that a higher return requires a higher investment cost. Given this latter assumption, steeper securities are more vulnerable to adverse selection, and may yield lower expected revenue, than flatter ones. (JEL D44 )

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1929
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 100 (2010)
Issue (Month): 4 (September)
Pages: 1929-35

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Handle: RePEc:aea:aecrev:v:100:y:2010:i:4:p:1929-35

Note: DOI: 10.1257/aer.100.4.1929
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  1. Samuelson, William, 1987. "Auctions with Contingent Payments: Comment," American Economic Review, American Economic Association, vol. 77(4), pages 740-45, September.
  2. Zheng, Charles Zhoucheng, 2001. "High Bids and Broke Winners," Staff General Research Papers 12665, Iowa State University, Department of Economics.
  3. Simon Board, 2007. "Bidding into the Red: A Model of Post-Auction Bankruptcy," Journal of Finance, American Finance Association, vol. 62(6), pages 2695-2723, December.
  4. Hansen, Robert G, 1985. "Auctions with Contingent Payments," American Economic Review, American Economic Association, vol. 75(4), pages 862-65, September.
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Cited by:
  1. Skrzypacz, Andrzej, 2013. "Auctions with contingent payments — An overview," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 666-675.
  2. Mehmet Ekmekci & Nenad Kos & Rakesh Vohra, 2013. "Just Enough or All: Selling a Firm," Working Papers 470, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Byoung Heon Jun & Elmar G. Wolfstetter, 2013. "Security Bid Auctions for Agency Contracts," CESifo Working Paper Series 4554, CESifo Group Munich.
  4. Rahul Deb & Debasis Mishra, 2013. "Implementation with Securities," Working Papers tecipa-484, University of Toronto, Department of Economics.

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