TY - UNPB
T1 - Security auctions with cash- and equity-bids
T2 - An experimental study
AU - Bajoori, Elnaz
AU - Wolk, Leonard
AU - Peeters, Ronald
PY - 2023/3/8
Y1 - 2023/3/8
N2 - We study the performance of cash- and equity-bid security auctions in an experiment using first- and second-price pricing rules. Theory predicts revenue equivalence between first- and second-price formats, equity auctions to generate more revenue than cash auctions, and for all formats to be efficient. We find that, on average, equity auctions produce larger revenue than cash auctions in absolute terms but not relative to equilibrium predictions. Important factors driving this result are substantial underbidding, large variance, and bidding functions being flatter in equity auctions. Furthermore, we find that first-price auctions produce larger revenues than second-price auctions, and cash auctions to be more efficient.
AB - We study the performance of cash- and equity-bid security auctions in an experiment using first- and second-price pricing rules. Theory predicts revenue equivalence between first- and second-price formats, equity auctions to generate more revenue than cash auctions, and for all formats to be efficient. We find that, on average, equity auctions produce larger revenue than cash auctions in absolute terms but not relative to equilibrium predictions. Important factors driving this result are substantial underbidding, large variance, and bidding functions being flatter in equity auctions. Furthermore, we find that first-price auctions produce larger revenues than second-price auctions, and cash auctions to be more efficient.
M3 - Working paper
T3 - Bath Economics Research Papers
BT - Security auctions with cash- and equity-bids
PB - Department of Economics, University of Bath
CY - Bath, UK
ER -