Article thumbnail

RULE CHANGES AND UNCERTAINTY IN DISCRIMINATORY AND UNIFORM PRICE AUCTIONS

By Jaclyn Beierlein and Hideaki Kiyoshi Kato

Abstract

The auction literature indicates that uncertainty about the value of auctioned goods increases underpricing in discriminatory price auctions. Such uncertainty has a smaller effect on uniform price auctions because the pricing rule aggregates bidders' information. We find that uncertainty resulting from inexperience with an auction mechanism has similar effects. Using initial public offering (IPO) data from Japan and Israel, we find that average underpricing increases temporarily in Japan's discriminatory price auctions after changes in the auction rules, which suggests that bidders reduce their bids in response to uncertainty. Underpricing in Israel's uniform price auctions is not affected by rule changes. 2007 The Southern Finance Association and the Southwestern Finance Association.

DOI identifier: 10.1111/j.1475-6803.2007.00203.x
OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.blackwell-synergy.c... (external link)

  • To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.

    Suggested articles