Uniform or Discriminatory Auctions: Endogenizing Bidder’s Choice in Divisible Goods Auctions*

Menachem Brenner, Dan Galai and Orly Sade

Chapter 12 in Behavioral Finance:Where Do Investors' Biases Come From?, 2016, pp 317-344 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The objective of this paper is to investigate the preferences of potential bidders in choosing between uniformand discriminatory auction pricing methods. Many financial assets, particularly government bonds, are issued in an auction. Uniform and discriminatory pricing constitute the two most popular mechanisms used in public auctions. Theoretical papers ave not been able to provide an unequivocal preference of one mechanism over the other. This study investigates both bidder choice and the impact of that choice on the pricing outcome of the auction by allowing bidders to choose between the two alternative systems. The majority of the bidders in the survey prefer uniform pricing. Those preferring uniform auctions tend to bid more aggressively than those preferring discriminatory. On average, the proceeds to the issuer were higher under the uniform price mechanism.

Keywords: Behavioral Finance; Rationality; Experimental Finance; Reference Points; Professionals; Gender; Culture and Finance; Equity Premium (search for similar items in EconPapers)
JEL-codes: D91 (search for similar items in EconPapers)
Date: 2016
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