SELLING SHARES TO RETAIL INVESTORS: AUCTION VS. FIXED PRICE

Veronika Grimm () and Jürgen Bierbaum
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Jürgen Bierbaum: Humboldt-Universität Berlin, Institut für Wirtschaftstheorie

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: 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.

Keywords: IPO; Uniform Price Auction; Open Offer; Proportional Rationing. (search for similar items in EconPapers)
JEL-codes: D44 D45 G32 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2004-02
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Citations: View citations in EconPapers (2)

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2004-08.pdf Fisrt version / Primera version, 2004 (application/pdf)

Related works:
Journal Article: Selling shares to retail investors: auction vs. fixed price (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2004-08

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