Advanced Search
MyIDEAS: Login to save this paper or follow this series

Security Bid Auctions for Agency Contracts

Contents:

Author Info

  • Byoung Heon Jun
  • Elmar G. Wolfstetter

Abstract

A principal uses security bid auctions to award an incentive contract to one among several agents in the presence of hidden action and hidden information. Securities range from cash to equity and call options. “Steeper” securities are better surplus extractors that narrow the gap between the two highest valuations, yet reduce effort incentives. In view of this trade-off, a hybrid share auction that includes a (possibly negative) cash reward to the winner, a minimum share, and an option to call a fixed wage contract, tends to outperform all other auctions, although it is not an optimal mechanism. However, by adding output targets to hybrid share auctions one can (arbitrary closely) implement the optimal mechanism.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-12/cesifo1_wp4554.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4554.

as in new window
Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:ces:ceswps:_4554

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: auctions and security design; agency problems; mechanism design;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Hansen, Robert G, 1985. "Auctions with Contingent Payments," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 862-65, September.
  2. Skrzypacz, Andrzej, 2013. "Auctions with contingent payments — An overview," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 31(5), pages 666-675.
  3. Matthew Rhodes-Kropf & S. Viswanathan, 2005. "Financing Auction Bids," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 789-815, Winter.
  4. Peter M. DeMarzo & Ilan Kremer & Andrzej Skrzypacz, 2005. "Bidding with Securities: Auctions and Security Design," American Economic Review, American Economic Association, American Economic Association, vol. 95(4), pages 936-959, September.
  5. Yeon-Koo Che & Jinwoo Kim, 2009. "Bidding With Securities: Comment," Discussion Papers, Columbia University, Department of Economics 0809-10, Columbia University, Department of Economics.
  6. Laffont, Jean-Jacques & Tirole, Jean, 1987. "Auctioning Incentive Contracts," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(5), pages 921-37, October.
  7. Board, Simon, 2007. "Selling options," Journal of Economic Theory, Elsevier, Elsevier, vol. 136(1), pages 324-340, September.
  8. Ding, Wei & Fan, Cuihong & Wolfstetter, Elmar G., 2010. "Horizontal mergers with synergies: first-price vs. profit-share auction," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University 336, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  9. Samuelson, William, 1987. "Auctions with Contingent Payments: Comment," American Economic Review, American Economic Association, American Economic Association, vol. 77(4), pages 740-45, September.
  10. R. Preston McAfee & John McMillan, 1987. "Competition for Agency Contracts," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 296-307, Summer.
  11. Cremer, Jacques, 1987. "Auctions with Contingent Payments: Comment," American Economic Review, American Economic Association, American Economic Association, vol. 77(4), pages 746, September.
  12. Shimon Kogan & John Morgan, . "Securities Auctions under Moral Hazard: An Experimental Study," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 2006-E23, Carnegie Mellon University, Tepper School of Business.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Skrzypacz, Andrzej, 2013. "Auctions with contingent payments — An overview," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 31(5), pages 666-675.
  2. Ding, Wei & Fan, Cuihong & Wolfstetter, Elmar G., 2013. "Horizontal mergers with synergies: Cash vs. profit-share auctions," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 31(5), pages 382-391.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4554. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.