Price versus Quantity Discrimination in Optimal IPOs

Moez Bennouri () and Sonia Falconieri ()
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Sonia Falconieri: CREED, University of Amsterdam

No 01-083/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper addresses the issue of the choice of the optimalinstrument to sell new shares, this choice being price versusquantity discrimination (rationing). Previous results in theliterature (Benveniste and Wilhelm, 1990) show that the issuing firmwould be better off if allowed to use both price and quantitydiscrimination. This is not consistent with what we observe inpractice.Using a mechanism design approach, we derive endogenously the optimalIPO mechanism and show that it can be implemented through a uniform priceacross institutional investors and a uniform rationing, whenappropriate.

Keywords: Initial Public Offering; Price Discrimination; Rationing; Optimal Auction (search for similar items in EconPapers)
JEL-codes: D8 G2 (search for similar items in EconPapers)
Date: 2001-09-12
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20010083

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