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

University of Michigan, Stephen M. Ross School of Business; Centre for Economic Policy Research (CEPR)

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)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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