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Endogenizing Bidder’s Choice in Financial Assets Auctions – An Experimental InvestigationMenachem BrennerNew York University (NYU) - Department of Finance Dan GalaiHebrew University of Jerusalem - Jerusalem School of Business Administration Orly SadeHebrew University of Jerusalem - Department of Finance June 1, 2009 NYU Working Paper No. FIN-07-011 Abstract: Many financial assets, especially government bonds, are issued by an auction mechanism. An important feature of the design is the auction pricing mechanism: Uniform vs. Discriminatory. Theoretical papers do not provide a definite answer regarding the preference of one mechanism over the other. Experimental papers investigated the issue under an exogenous equal number of bidders. We investigate the bidders choice and the impact of that choice on the outcome of the auction by letting them choose between the two alternative systems. The majority of the bidders in the survey have chosen the uniform method. Those that prefer the uniform auction bid, on average, more aggressively than those that choose the discriminatory one. On average the revenues to the issuer were higher under the uniform price mechanism.
Number of Pages in PDF File: 34 working papers seriesDate posted: November 3, 2008 ; Last revised: October 18, 2009Suggested CitationContact Information
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