Measuring Market Power in the IPO Underwriter
Yue Cai ()
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Yue Cai: Waseda University
No 2108, Working Papers from Waseda University, Faculty of Political Science and Economics
This paper study underwriter’s competitive behavior in the Japanese IPO underwriting markets. We use demand estimation techniques to obtain marginal costs, and empirically compare several models of conduct. We find that differentiated product Bertrand, partially collusive models are rejected against the perfectly collusive models. We conclude that spreads in the Japanese IPO underwriting markets are consistent with the collusive pricing behavior. Underwriters seem to internalize the effect of their spread on their rivals.
Pages: 43 pages
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