Price versus Quantity Discrimination in Optimal IPOs
AbstractThis paper addresses the issue of the choice of the optimalinstrument to sell new shares, this choice being price versusquantity discrimination (rationing). Previous results in theliterature (Benveniste and Wilhelm, 1990) show that the issuing firmwould be better off if allowed to use both price and quantitydiscrimination. This is not consistent with what we observe inpractice.Using a mechanism design approach, we derive endogenously the optimalIPO mechanism and show that it can be implemented through a uniform priceacross institutional investors and a uniform rationing, whenappropriate.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 01-083/1.
Date of creation: 12 Sep 2001
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Web page: http://www.tinbergen.nl
Initial Public Offering; Price Discrimination; Rationing; Optimal Auction;
Find related papers by JEL classification:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- G2 - Financial Economics - - Financial Institutions and Services
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-10-16 (All new papers)
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- Guray Kucukkocaoglu, 2007. "Underpricing in Turkey: Comparison of the IPO Methods," Money Macro and Finance (MMF) Research Group Conference 2006 8, Money Macro and Finance Research Group.
- Guray Kucukkocaoglu & Ozge Sezgin Alp, 2012. "IPO mechanism selection by using Classification and Regression Trees," Quality & Quantity: International Journal of Methodology, Springer, vol. 46(3), pages 873-888, April.
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