The Optimality of Uniform Pricing in IPOs: An Optimal Auction Approach

Posted: 27 Oct 2008

See all articles by Moez Bennouri

Moez Bennouri

Montpellier Business School

Sonia Falconieri

Bayes Business School (formerly Cass)

Date Written: 2008

Abstract

This paper uses an optimal auction approach to investigate the conditions under which uniform pricing in IPOs is optimal. We show that the optimality of a uniform price in IPOs depends crucially on whether the (optimal) allocation rule is restricted. These restrictions may stem from the retail investors' budget constraint and/or from the institutional investors' preferences. We show that the main determinant of the optimality of a uniform pricing rule is the existence and the shape of the retail investors' budget constraint. In contrast, institutional investors' preferences are shown to mainly affect the optimal allocation rule.

Keywords: D8, G2

Suggested Citation

Bennouri, Moez and Falconieri, Sonia, The Optimality of Uniform Pricing in IPOs: An Optimal Auction Approach (2008). Review of Finance, Vol. 12, Issue 4, pp. 673-700, 2008, Available at SSRN: https://ssrn.com/abstract=1289175 or http://dx.doi.org/rfn006

Moez Bennouri (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Sonia Falconieri

Bayes Business School (formerly Cass) ( email )

London, EC1Y 8TZ
Great Britain

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
572
PlumX Metrics