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Delegated Bidding and the Allocative Effects of Alternative Accounting Rules

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  • Marinovic, Ivan

    (Stanford University)

Abstract

I study the efficiency of three prominent accounting rules in a delegated bidding setting where bidders' incentives are tied to both accounting income and economic surplus. Trade efficiency is maximized (minimized) by the value-in-use method (historical cost method). The exit-value method generates an accounting based winner's curse that results in fire-sale-like valuations. Yet, in the limit, as the number of bidders grows large, the efficiency of the exit-value method converges to that of the value-in-use method.

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  • Marinovic, Ivan, 2014. "Delegated Bidding and the Allocative Effects of Alternative Accounting Rules," Research Papers 3251, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3251
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    File URL: http://www.gsb.stanford.edu/faculty-research/working-papers/delegated-bidding-allocative-effects-alternative-accounting-rules
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    Cited by:

    1. Bos, Olivier & Gomez-Martinez, Francisco & Onderstal, Sander & Truyts, Tom, 2021. "Signalling in auctions: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 448-469.
    2. Olivier Bos & Tom Truyts, 2021. "Auctions with signaling concerns," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(2), pages 420-448, May.

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