Subscription of shares
The paper studies share subscription schemes and claims that these schemes are useful when it is desirable to let an item be held or a project be undertaken by a group of bidders. Examples of such instances include the privatization of state-owned enterprises, the introduction of strategic investors, the procurement of large government construction projects, the issuance of treasury bills, and the resolution of the banks' toxic assets. I show that these share subscription schemes result in sale prices that do approach the fundamental value as the number of bidders increases. This is in contrast to share auctions in Wilson (1979) in which the Nash-equilibrium sale price can yield a significantly lower sale price than a unit-auction.
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References listed on IDEAS
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- Boyer, Marcel & Moreaux, Michel, 1986. "Perfect competition as the limit of a hierarchical market game," Economics Letters, Elsevier, vol. 22(2-3), pages 115-118.
- Robert Wilson, 1979. "Auctions of Shares," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 675-689.
- Anderson, Simon P. & Engers, Maxim, 1992. "Stackelberg versus Cournot oligopoly equilibrium," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 127-135, March.
- Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 395-410.
- Yeon-Koo Che & Ian Gale, 1998. "Standard Auctions with Financially Constrained Bidders," Review of Economic Studies, Oxford University Press, vol. 65(1), pages 1-21.
- Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 733-64.
- Jianbo Zhang & Zhentang Zhang, 1999. "Asymptotic Efficiency in Stackelberg Markets with Incomplete Information," CIG Working Papers FS IV 99-07, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Baye, Michael R. & Hoppe, Heidrun C., 2003. "The strategic equivalence of rent-seeking, innovation, and patent-race games," Games and Economic Behavior, Elsevier, vol. 44(2), pages 217-226, August.
- Umlauf, Steven R., 1993. "An empirical study of the Mexican Treasury bill auction," Journal of Financial Economics, Elsevier, vol. 33(3), pages 313-340, June.
- B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 1-31.
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