Selling shares to retail investors: auction vs. fixed price
AbstractWe analyze the problem of selling shares of a divisible good to a large number of buyers when demand is uncertain. We characterize equilibria of two popular mechanisms, a fixed price mechanism and a uniform price auction, and compare the revenues. While in the auction truthful bidding is a dominant strategy, we find that bidders have an incentive to overstate their demand in the fixed price mechanism. For some parameter values this yields the surprising result that the fixed price mechanism outperforms the auction.
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Bibliographic InfoArticle provided by Springer in its journal Review of Economic Design.
Volume (Year): 10 (2006)
Issue (Month): 2 (August)
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Web page: http://link.springer.de/link/service/journals/10058/index.htm
Other versions of this item:
- Veronika Grimm & Jürgen Bierbaum, 2004. "Selling Shares To Retail Investors: Auction Vs. Fixed Price," Working Papers. Serie AD 2004-08, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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