Competition among Sellers in Securities Auctions
Alexander S. Gorbenko
London Business School
MIT Sloan School of Management
July 19, 2010
American Economic Review, Vol. 101, No. 5, pp. 1806-1841
We study simultaneous security-bid second-price auctions with competition among sellers for potential bidders. The sellers compete by designing ordered sets of securities that the bidders can offer as payment for the assets. Upon observing auction designs, potential bidders decide which auctions to enter. We characterize all symmetric equilibria and show that there always exist equilibria in which auctions are in standard securities or their combinations. In large markets the unique equilibrium is auctions in pure cash. We extend the model for competition in reserve prices and show that binding reserve prices never constitute equilibrium as long as equilibrium security designs are not call options.
Number of Pages in PDF File: 62
Keywords: auctions, security design, competition among sellers, simultaneous auctions, endogenous entry
JEL Classification: D43, D44, G32, G34Accepted Paper Series
Date posted: March 6, 2008 ; Last revised: August 31, 2011
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