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Uniform Price Auctions and Fixed Price Offerings in IPOs: An Experimental Comparison

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  • Ping Zhang

    () (School of Economics, University of Nottingham)

Abstract

We compare uniform price auctions with fixed price offerings in Initial Public Offerings (IPO) using laboratory experiments. The experimental environment is based on the Biais and Faugeron-Grouzet (2002) model. Standard predictions based on tacit collusion equilibria (TCE) suggest lower revenues in uniform price auctions, although alternative equilibria allow for higher revenues. In our experiment, there is no evidence that TCE are played. The experiment suggests that the uniform price auctions are superior to fixed price offerings in terms of raising revenues.

Suggested Citation

  • Ping Zhang, 2008. "Uniform Price Auctions and Fixed Price Offerings in IPOs: An Experimental Comparison," Discussion Papers 2008-05, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  • Handle: RePEc:cdx:dpaper:2008-05
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    More about this item

    Keywords

    Experiment; IPO; Uniform price auction; Fixed price offering; Share auction;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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