Bidding with Securities: Auctions and Security Design
We study security-bid auctions in which bidders compete for an asset by bidding with securities whose payments are contingent on the asset's realized value. In formal security-bid auctions, the seller restricts the security design to an ordered set and uses a standard auction format (e.g., first- or second-price). In informal settings, bidders offer arbitrary securities and the seller chooses the most attractive bid, based on his beliefs, ex post. We characterize equilibrium and show that steeper securities yield higher revenues, that auction formats can be ranked based on the security design, and that informal auctions lead to the lowest possible revenues.
Volume (Year): 95 (2005)
Issue (Month): 4 (September)
|Contact details of provider:|| Web page: https://www.aeaweb.org/aer/|
More information through EDIRC
|Order Information:||Web: https://www.aeaweb.org/subscribe.html|
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.:
- Robert M. Townsend, 1979.
"Optimal contracts and competitive markets with costly state verification,"
45, Federal Reserve Bank of Minneapolis.
- Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
- Che, Yeon-Koo & Gale, Ian, 2000. "The Optimal Mechanism for Selling to a Budget-Constrained Buyer," Journal of Economic Theory, Elsevier, vol. 92(2), pages 198-233, June.
- Ravid, S. Abraham & Spiegel, Matthew, 1997. "Optimal Financial Contracts for a Start-Up with Unlimited Operating Discretion," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(03), pages 269-286, September.
- repec:oup:qjecon:v:102:y:1987:i:2:p:179-221 is not listed on IDEAS
- R. Preston McAfee & John McMillan, 1987. "Competition for Agency Contracts," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 296-307, Summer.
- Maskin, Eric S & Riley, John G, 1984.
"Optimal Auctions with Risk Averse Buyers,"
Econometric Society, vol. 52(6), pages 1473-1518, November.
- Board, Simon, 2007. "Selling options," Journal of Economic Theory, Elsevier, vol. 136(1), pages 324-340, September.
- Hansen, Robert G, 1985. "Auctions with Contingent Payments," American Economic Review, American Economic Association, vol. 75(4), pages 862-65, September.
- Lacker, Jeffrey M & Weinberg, John A, 1989.
"Optimal Contracts under Costly State Falsification,"
Journal of Political Economy,
University of Chicago Press, vol. 97(6), pages 1345-63, December.
- Lacker, J.M., 1989. "Optimal Contracts Under Costly State Falsification," Purdue University Economics Working Papers 956, Purdue University, Department of Economics.
- Martin, Kenneth J, 1996. " The Method of Payment in Corporate Acquisitions, Investment Opportunities, and Management Ownership," Journal of Finance, American Finance Association, vol. 51(4), pages 1227-46, September.
- Riley, John G & Samuelson, William F, 1981.
American Economic Review,
American Economic Association, vol. 71(3), pages 381-92, June.
- Cremer, Jacques, 1987. "Auctions with Contingent Payments: Comment," American Economic Review, American Economic Association, vol. 77(4), pages 746, September.
- Ramey, Garey, 1996. "D1 Signaling Equilibria with Multiple Signals and a Continuum of Types," Journal of Economic Theory, Elsevier, vol. 69(2), pages 508-531, May.
- Ken Binmore & Paul Klemperer, 2001.
"The Biggest Auction Ever: the Sale of the British 3G Telecom Licenses,"
2002-W4, Economics Group, Nuffield College, University of Oxford, revised 01 Sep 2001.
- Ken Binmore & Paul Klemperer, 2002. "The Biggest Auction Ever: the Sale of the British 3G Telecom Licences," Economic Journal, Royal Economic Society, vol. 112(478), pages C74-C96, March.
- Binmore, Kenneth & Klemperer, Paul, 2002. "The Biggest Auction Ever: The Sale of the British 3G Telecom Licences," CEPR Discussion Papers 3214, C.E.P.R. Discussion Papers.
- Paul Klemperer & Ken Binmore, 2001. "The Biggest Auction Ever: the Sale of the British 3G Telecom Licences," Economics Series Working Papers 2002-W04, University of Oxford, Department of Economics.
- Matthew Rhodes-Kropf & S. Viswanathan, 2000. "Corporate Reorganizations and Non-Cash Auctions," Journal of Finance, American Finance Association, vol. 55(4), pages 1807-1854, 08.
- repec:oup:restud:v:55:y:1988:i:3:p:409-29 is not listed on IDEAS
- Milgrom, Paul R & Weber, Robert J, 1982.
"A Theory of Auctions and Competitive Bidding,"
Econometric Society, vol. 50(5), pages 1089-1122, September.
- Zheng, Charles Z., 2001.
"High Bids and Broke Winners,"
Journal of Economic Theory,
Elsevier, vol. 100(1), pages 129-171, September.
- Nachman, David C & Noe, Thomas H, 1994. "Optimal Design of Securities under Asymmetric Information," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 1-44.
- Cho, In-Koo & Sobel, Joel, 1990. "Strategic stability and uniqueness in signaling games," Journal of Economic Theory, Elsevier, vol. 50(2), pages 381-413, April.
- Peter DeMarzo & Darrell Duffie, 1999. "A Liquidity-Based Model of Security Design," Econometrica, Econometric Society, vol. 67(1), pages 65-100, January.
- Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Laffont, Jean-Jacques & Tirole, Jean, 1987.
"Auctioning Incentive Contracts,"
Journal of Political Economy,
University of Chicago Press, vol. 95(5), pages 921-37, October.
- Samuelson, William, 1987. "Auctions with Contingent Payments: Comment," American Economic Review, American Economic Association, vol. 77(4), pages 740-45, September.
- Kohlberg, Elon & Mertens, Jean-Francois, 1986.
"On the Strategic Stability of Equilibria,"
Econometric Society, vol. 54(5), pages 1003-37, September.
- E. Kohlberg & J.-F. Mertens, 1998. "On the Strategic Stability of Equilibria," Levine's Working Paper Archive 445, David K. Levine.
- KOHLBERG, Elon & MERTENS, Jean-FranÃ§ois, . "On the strategic stability of equilibria," CORE Discussion Papers RP 716, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:95:y:2005:i:4:p:936-959. 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: (Jane Voros)or (Michael P. Albert)
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.