 Securities auctions with pre-project information managementTak-Yuen Wong and Ho-Po Crystal Wong International Journal of Industrial Organization, 2023, vol. 88, issue C Abstract: This paper analyzes securities auctions in which bidders have an option to acquire information after winning the right to develop a project. The payment consists of an up-front cash bid and a contingent security bid, which distorts investment and information acquisition relative to the first-best. We order securities in terms of their steepness: the payment of a steeper security is more sensitive to high project values. The agent’s incentives to acquire information that prevents either cost overruns (Type I errors) or false cancellations (Type II errors) decrease with the steepness of securities. The optimal limited-liability securities auction involves bidding debt that minimizes the distortions in the agent’s incentives to acquire performance-enhancing information. The model delivers implications on the practices commonly observed in oil lease auctions. Keywords: Security bid; Auction; Information acquisition; Investment; Security design; Oil and gas lease auctions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:88:y:2023:i:c:s0167718723000103 DOI: 10.1016/j.ijindorg.2023.102929 Access Statistics for this article International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal More articles in International Journal of Industrial Organization from Elsevier |
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