A Complete Characterization of Pure Strategy Equilibrium in Uniform Price IPO Auctions
Collusive equilibria in share auctions despite being the focus of previous theoretical research, have received little empirical or experimental support. We develop a theoretical model of uniform price initial public offering (IPO) auctions and show that there exists a continuum of pure strategy equilibria where investors with a higher expected valuation bid more aggressively and as a result the market price increases with the market value. The collusive equilibria lie in fact on the boundary of this set, which is obtained under stricter conditions when demand is discrete than in the continuous format. Our results have important implications for the design of IPO auctions.
|Date of creation:||Apr 2006|
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- Orly Sade & Charles Schnitzlein & Jaime Zender, 2006. "Competition and cooperation in divisible good auctions: An experimental examination," Artefactual Field Experiments 00105, The Field Experiments Website.
- Richard Engelbrecht-Wiggans & John A. List & David H. Reiley, 2006.
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- Richard Engelbrecht-Wiggans & John List & David Reiley, 2006. "Demand Reduction in Multi-Unit Auctions with Varying Numbers of Bidders Theory and Evidence from a Field Experiment," Natural Field Experiments 00485, The Field Experiments Website.
- Orly Sade & Charles Schnitzlein & Jaime F. Zender, 2006. "Competition and Cooperation in Divisible Good Auctions: An Experimental Examination," Review of Financial Studies, Society for Financial Studies, vol. 19(1), pages 195-235.
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- Umlauf, Steven R., 1993. "An empirical study of the Mexican Treasury bill auction," Journal of Financial Economics, Elsevier, vol. 33(3), pages 313-340, June. Full references (including those not matched with items on IDEAS)
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