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Characterization of Pure Strategy Equilibria in Uniform Price IPO Auctions

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  • Ping Zhang

    () (School of Economics, University of Nottingham)

Abstract

We characterize pure strategy equilibria of common value multi-unit uniform price auctions under the framework of initial public offerings, where bidders have incomplete private information regarding the value of shares and submit discrete demand schedules. We show that there exists a continuum of equilibria where investors with a higher expectation about the value of shares bid for higher quantities at higher prices, and as a result the market price increases with the market value. The collusive equilibria, in which investors place bids regardless of their expectation about the value, are obtained under stricter conditions than in the continuous price case.

Suggested Citation

  • Ping Zhang, 2009. "Characterization of Pure Strategy Equilibria in Uniform Price IPO Auctions," Discussion Papers 2009-05, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  • Handle: RePEc:cdx:dpaper:2009-05
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    File URL: http://www.nottingham.ac.uk/cedex/documents/papers/2009-05.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    IPO; uniform price auction; divisible goods auction; share auction; tacit collusion;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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