Competition among Sellers in Securities Auctions

62 Pages Posted: 6 Mar 2008 Last revised: 31 Aug 2011

See all articles by Alexander S. Gorbenko

Alexander S. Gorbenko

University College London - Department of Economics and School of Management

Andrey Malenko

Boston College; European Corporate Governance Institute (ECGI)

Date Written: July 19, 2010

Abstract

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.

Keywords: auctions, security design, competition among sellers, simultaneous auctions, endogenous entry

JEL Classification: D43, D44, G32, G34

Suggested Citation

Gorbenko, Alexander S. and Malenko, Andrey, Competition among Sellers in Securities Auctions (July 19, 2010). American Economic Review, Vol. 101, No. 5, pp. 1806-1841, Available at SSRN: https://ssrn.com/abstract=1102664

Alexander S. Gorbenko

University College London - Department of Economics and School of Management ( email )

Drayton House, 30 Gordon Street
30 Gordon Street
London, WC1H 0AX
United Kingdom

Andrey Malenko (Contact Author)

Boston College

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Chestnut Hill, MA 02467
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

HOME PAGE: http://www.amalenko.com

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