Review of Economic Design

, Volume 10, Issue 2, pp 85–112 | Cite as

Selling shares to retail investors: auction vs. fixed price

Original Paper

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 we find that the fixed price mechanism outperforms the auction.

Keywords

IPO Uniform price auction Open offer Proportional rationing 

JEL Classification Numbers

D44 D45 G32 

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Copyright information

© Springer-Verlag 2006

Authors and Affiliations

  1. 1.Allianz Lebensversicherungs-AGStuttgartGermany
  2. 2.University of CologneKölnGermany

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