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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| Length: | 36 pages |
| Date of creation: | Feb 2004 |
| Date of revision: | |
| Publication status: | Published by Ivie |
| Handle: | RePEc:ivi:wpasad:2004-08 |
| Contact details of provider: | Postal: Phone: +34 96 319 00 50 Fax: +34 96 319 00 55 Web page: http://www.ivie.es/Email: More information through EDIRC
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References listed on IDEAS
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- Veronika Grimm & Jürgen Bierbaum, 2004. "Selling Shares To Retail Investors: Auction Vs. Fixed Price," Working Papers. Serie AD 2004-08, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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