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Price versus Quantity Discrimination in Optimal IPOs

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Author Info

  • Moez Bennouri

    (Universit� de Science �conomique et Gestion, Tunis)

  • Sonia Falconieri

    ()
    (CREED, University of Amsterdam)

Abstract

This 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 Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 01-083/1.

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Date of creation: 12 Sep 2001
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Handle: RePEc:dgr:uvatin:20010083

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Web page: http://www.tinbergen.nl

Related research

Keywords: Initial Public Offering; Price Discrimination; Rationing; Optimal Auction;

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Cited by:
  1. 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.
  2. 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.

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