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Bidding with Securities: Comment

Author

Listed:
  • Yeon-Koo Che
  • Jinwoo Kim

Abstract

Peter DeMarzo, Ilan Kremer, and Andrzej Skrzypacz (2005) analyzed auctions in which bidders compete in securities. They show that a steeper security leads to a higher expected revenue for the seller, and also use this to establish the revenue ranking between standard auctions. In this comment, we obtain the opposite results to DKS's by assuming that a higher return requires a higher investment cost. Given this latter assumption, steeper securities are more vulnerable to adverse selection, and may yield lower expected revenue, than flatter ones. (JEL D44 )

Suggested Citation

  • Yeon-Koo Che & Jinwoo Kim, 2010. "Bidding with Securities: Comment," American Economic Review, American Economic Association, vol. 100(4), pages 1929-1935, September.
  • Handle: RePEc:aea:aecrev:v:100:y:2010:i:4:p:1929-35
    Note: DOI: 10.1257/aer.100.4.1929
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1929
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    References listed on IDEAS

    as
    1. Peter M. DeMarzo & Ilan Kremer & Andrzej Skrzypacz, 2005. "Bidding with Securities: Auctions and Security Design," American Economic Review, American Economic Association, vol. 95(4), pages 936-959, September.
    2. Zheng, Charles Z., 2001. "High Bids and Broke Winners," Journal of Economic Theory, Elsevier, vol. 100(1), pages 129-171, September.
    3. Samuelson, William, 1987. "Auctions with Contingent Payments: Comment," American Economic Review, American Economic Association, vol. 77(4), pages 740-745, September.
    4. Hansen, Robert G, 1985. "Auctions with Contingent Payments," American Economic Review, American Economic Association, vol. 75(4), pages 862-865, September.
    5. Simon Board, 2007. "Bidding into the Red: A Model of Post-Auction Bankruptcy," Journal of Finance, American Finance Association, vol. 62(6), pages 2695-2723, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Mike Burkart & Samuel Lee, 2016. "Smart Buyers," Review of Corporate Finance Studies, Oxford University Press, vol. 5(2), pages 239-270.
    2. He, Wei & Li, Jiangtao, 2016. "Efficient dynamic mechanisms with interdependent valuations," Games and Economic Behavior, Elsevier, vol. 97(C), pages 166-173.
    3. Mehmet Ekmekci & Nenad Kos & Rakesh Vohra, 2016. "Just Enough or All: Selling a Firm," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 223-256, August.
    4. Rahul Deb & Debasis Mishra, 2013. "Implementation with Securities," Working Papers tecipa-484, University of Toronto, Department of Economics.
    5. Byoung Jun & Elmar Wolfstetter, 2014. "Security bid auctions for agency contracts," Review of Economic Design, Springer;Society for Economic Design, vol. 18(4), pages 289-319, December.
    6. repec:eee:mateco:v:75:y:2018:i:c:p:57-66 is not listed on IDEAS
    7. Takeharu Sogo & Dan Bernhardt & Tingjun Liu, 2016. "Endogenous Entry to Security-Bid Auctions," American Economic Review, American Economic Association, vol. 106(11), pages 3577-3589, November.
    8. Liu, Tingjun, 2016. "Optimal equity auctions with heterogeneous bidders," Journal of Economic Theory, Elsevier, vol. 166(C), pages 94-123.
    9. Abhishek, Vineet & Hajek, Bruce & Williams, Steven R., 2015. "On bidding with securities: Risk aversion and positive dependence," Games and Economic Behavior, Elsevier, vol. 90(C), pages 66-80.
    10. Skrzypacz, Andrzej, 2013. "Auctions with contingent payments — An overview," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 666-675.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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