Skip to main content

Please enter a keyword and click the arrow to search the site

On Underpricing in Share Auctions

Subject

Finance

Publishing details

IFA Working Paper

Authors / Editors

Nyborg K G

Publication Year

1997

Abstract

NOW REVISED AS IFA 358 Uniform price auctions have been shown to be susceptible to underpricing, even in the absence of private information. Without imposing any restriction on admissible demand functions, this paper shows that there is a unique class of supply uncertainty robust demand functions. These are also equilibria if bidders have private information on supply. Furthermore, it is shown that underpricing can be eliminated by allowing bidders only to submit a finite number of bids or by altering the rationing rule. This works whether or not there is supply uncertainty. These results suggest that non-informational underpricing equilibria in uniform price auctions need not be important in practice. This is broadly consistent with the empirical evidence on the performance of uniform versus discriminatory price auctions.

Publication Notes

Now revised as IFA 358

Publication Research Centre

Institute of Finance and Accounting

Series Number

FIN 260

Series

IFA Working Paper

Available on ECCH

No


Select up to 4 programmes to compare

Select one more to compare
×
subscribe_image_desktop 5949B9BFE33243D782D1C7A17E3345D0

Sign up to receive our latest news and business thinking direct to your inbox

×

Sign up to receive our latest course information and business thinking

Leave your details above if you would like to receive emails containing the latest thought leadership, invitations to events and news about courses that could enhance your career. If you would prefer not to receive our emails, you can still access the case study by clicking the button below. You can opt-out of receiving our emails at any time by visiting: https://london.edu/my-profile-preferences or by unsubscribing through the link provided in our emails. View our Privacy Policy for more information on your rights.