Uniform Price Auctions with a Public Pool: An Experimental Examination Using an IPO Setup

50 Pages Posted: 2 Sep 2015 Last revised: 14 Oct 2018

See all articles by Charles R. Schnitzlein

Charles R. Schnitzlein

School of Business, University of Vermont

Minjie Shao

University of Central Florida

Ann E. Sherman

DePaul University

Date Written: October 8, 2018

Abstract

We offer experimental and theoretical evidence that large, sealed-bid, multi-unit common value auctions for assets with substantial price uncertainty may be improved through hybrids with a separate retail tranche or ‘public pool.’ The auctions in our laboratory experiments incorporate initial public offering (IPO) features including endogenous entry, costly information acquisition and differing capacity constraints. Hybrids increase proceeds and reduce price volatility, price errors and incentives for small bidders to free ride. Our results suggest that auctions of IPOs, equity crowdfunding/crowdinvesting, risky debt and other assets with substantial price uncertainty should include separate public pools (non-price-setting tranches) for the general public.

Keywords: Common value auction, Experimental, Competitive bidding, Uniform price auction, Multi-unit auction, Hybrid auction, Initial public offering, Retail tranche, Public pool, IPO auction, private equity, equity crowdfunding, crowdinvesting, JOBS Act, Regulation A

JEL Classification: C92, D02, D44, G02

Suggested Citation

Schnitzlein, Charles R. and Shao, Minjie and Sherman, Ann E., Uniform Price Auctions with a Public Pool: An Experimental Examination Using an IPO Setup (October 8, 2018). Available at SSRN: https://ssrn.com/abstract=2653899 or http://dx.doi.org/10.2139/ssrn.2653899

Charles R. Schnitzlein

School of Business, University of Vermont ( email )

Burlington, VT 05405
United States
802-656-9281 (Phone)

Minjie Shao

University of Central Florida ( email )

4000 Central Florida Blvd
Orlando, FL 32816-1400
United States

Ann E. Sherman (Contact Author)

DePaul University ( email )

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States
312-362-5499 (Phone)

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

Paper statistics

Downloads
174
Abstract Views
1,220
rank
213,539
PlumX Metrics