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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- Richard Engelbrecht-Wiggans & John A. List & David H. Reiley, 2006.
"Demand Reduction In Multi-Unit Auctions With Varying Numbers Of Bidders: Theory And Evidence From A Field Experiment ,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 203-231, 02.
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- 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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