Abstract
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, the first-price equity auction produces higher revenues than the other formats. However, relative to equilibrium, equity auctions perform worse than cash auctions. Furthermore, all formats display deviations from ex ante efficiency, yet these deviations are not statistically distinguishable from one another.
| Original language | English |
|---|---|
| Article number | 104702 |
| Pages (from-to) | 1-26 |
| Number of pages | 26 |
| Journal | European Economic Review |
| Volume | 163 |
| Early online date | 23 Feb 2024 |
| DOIs | |
| Publication status | Published - Apr 2024 |
Funding
We thank Cathy Zeng for valuable feedback on the experimental implementation and seminar participants at University of Auckland for their feedback as well as Jörg Oechssler for interesting and valuable discussions regarding the use of bootstrapping techniques. We also acknowledge helpful suggestions from David Levine (editor), an associate editor and two anonymous referees. Funding for the study was received from the University of Bath, International Funding Scheme (Bajoori) and supplemented using individual research funds (Wolk), The Netherlands.
| Funders |
|---|
| University of Auckland |
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