Selling shares to retail investors: auction vs. fixed price
We analyze the problem of selling shares of a divisible good to a large number of buyers when demand is uncertain. We characterize equilibria of two popular mechanisms, a fixed price mechanism and a uniform price auction, and compare the revenues. While in the auction truthful bidding is a dominant strategy, we find that bidders have an incentive to overstate their demand in the fixed price mechanism. For some parameter values this yields the surprising result that the fixed price mechanism outperforms the auction.
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Volume (Year): 10 (2006)
Issue (Month): 2 (August)
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"Selling shares to retail investors: auction vs. fixed price,"
Review of Economic Design,
Springer;Society for Economic Design, vol. 10(2), pages 85-112, August.
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