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Competition among Sellers in Securities Auctions

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  • Alexander S. Gorbenko
  • Andrey Malenko
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    Abstract

    We study simultaneous security-bid second-price auctions with competition among sellers for potential bidders. The sellers compete by designing ordered sets of securities that the bidders can offer as payment for the assets. Upon observing auction designs, potential bidders decide which auctions to enter. We characterize all symmetric equilibria and show that there always exist equilibria in which auctions are in standard securities or their combinations. In large markets the unique equilibrium is auctions in pure cash. We extend the model for competition in reserve prices and show that binding reserve prices never constitute equilibrium as long as equilibrium security designs are not call options. (JEL D44, D82, G10)

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    Bibliographic Info

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

    Volume (Year): 101 (2011)
    Issue (Month): 5 (August)
    Pages: 1806-41

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    Handle: RePEc:aea:aecrev:v:101:y:2011:i:5:p:1806-41

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    1. R. Preston McAfee & Daniel Vincent, 1992. "Updating the Reserve Price in Common Value Auctions," Discussion Papers 977, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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    13. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    14. Peters, Michael & Severinov, Sergei, 1997. "Competition among Sellers Who Offer Auctions Instead of Prices," Journal of Economic Theory, Elsevier, vol. 75(1), pages 141-179, July.
    15. Cremer, Jacques, 1987. "Auctions with Contingent Payments: Comment," American Economic Review, American Economic Association, vol. 77(4), pages 746, 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. James Albrecht, Pieter Gautier, Susan Vroman, 2013. "Efficient Entry in Competing Auctions," Working Papers gueconwpa~13-13-05, Georgetown University, Department of Economics.

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