Selling shares to retail investorsauction vs. fixed price
- Grimm, Veronika
- Bierbaum, Jürgen
Année de publication: 2004
Número: 8
Type: Working Paper
Résumé
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 this yields the surprising result that the fixed price mechanism outperforms the auction.