Signalling in the Internet Craze of Initial Public Offerings

In this paper we analyze the clustering phenomenon of underpricing in initial public offerings (IPOs), where firms in a particular industry choose to issue their new shares at the same time and at great discounts. The industry consists of many firms that have private in-formation about their own qualities (high or low) and that must raise external capital first before production. In the product market, firms compete through quality ladders, where each high-quality firm monopolizes the production of a particular variety of product. We show that self-fulfilling multiple equilibria arise. In one, no firm underprices the IPO. In the other, all high-quality firms underprice their IPOs, resulting in clustering. Moreover, the clustering is more likely to occur in economic upturns than in downturns, and in an easy credit market than in a tight market.Initial public offerings; Signalling; Clustering; Multiple equilibria.

Market Integration, Matching and Wages

When it is costly for agents to find a match, integrating small markets into a larger one increases the matching difficulty. We examine such dependence of the number of matches on the market size by explicitely modelling firms' attempt to attract workers by posting wages. It is shown that integration reduces the relative market power of agents on the much shorter side of the market. Thus, if there are at least as many workers as jobs, integrating markets increases wages; if there are much fewer workers than jobs, integrating markets reduces wages. This is the case even though integration does not change the worker/job ratio in the market. Regardless of the wage response, market integration reduces social welfare when everyone is weighted equally and when other benefits of integration such as improved match qualities are absent. We characterize the upper bound on the welfare loss from increased matching difficulty and show that the marginal welfare loss shrinks as the market becomes increasingly integrated. Lorsqu'il est coûteux pour les agents économiques de trouver un partenaire d'échange, le fait d'intégrer de petits marchés dans un plus grand augmente les difficultés d'appariement. Nous examinons dans quelle mesure les nombre d'appariements dépend de la taille du marché en modélisant explicitement les tentatives de la firme d'attirer des travailleurs en affichant des salaires. Nous montrons que l'intégration réduit le pouvoir de marché des agents sur le côté le moins saturé du marché. Ainsi, s'il y a au moins autant de travailleurs que de postes, l'intégration des marchés augmente les salaires; s'il y en a beaucoup moins, l'intégration réduit les salaires. Ceci est le cas même si le ratio travailleurs/postes reste inchangé. Indépendamment de la réaction des salaires, l'intégration des marchés réduit le bien-être social lorsque chacun est pondéré uniformément et lorsque d'autres bienfaits de l'intégration comme la meilleure qualité des appariements sont absents. Nous caractérisons la limite supérieure des pertes de bien-être résultant de difficultés plus élevées d'appariement et montrons que la perte marginale de bien-être décroît lorsque le marché s'intègre de plus en plus.market integration, wage posting, endogenous matches

Screening, Bidding, and the Loan Market Tightness

Bank loans are more available and cheaper for new and small businesses in the U.S. in concentrated banking areas than in competitive banking areas. To explain this anomaly, we analyze banks' decisions to screen projects and their subsequent competition in loan provisions. It is shown that, by exacerbating the winner's curse, an increase in the number of banks can reduce banks' screening probability by so much that the number of banks that actively compete in loan provisions falls and the expected loan rate rises. This is the case when the screening cost is low, which induces all active bidders to be informed. The opposite outcome occurs when the screening cost is high, in which case there are su±ciently many uninformed banks in bidding to attenuate the winner's curse. We also brie°y examine policy implications.Loans; Screening; Bidding; Informational externality

Pareto Boundary of the Rate Region for Single-Stream MIMO Interference Channels: Linear Transceiver Design

We consider a multiple-input multiple-output (MIMO) interference channel (IC), where a single data stream per user is transmitted and each receiver treats interference as noise. The paper focuses on the open problem of computing the outermost boundary (so-called Pareto boundary-PB) of the achievable rate region under linear transceiver design. The Pareto boundary consists of the strict PB and non-strict PB. For the two user case, we compute the non-strict PB and the two ending points of the strict PB exactly. For the strict PB, we formulate the problem to maximize one rate while the other rate is fixed such that a strict PB point is reached. To solve this non-convex optimization problem which results from the hard-coupled two transmit beamformers, we propose an alternating optimization algorithm. Furthermore, we extend the algorithm to the multi-user scenario and show convergence. Numerical simulations illustrate that the proposed algorithm computes a sequence of well-distributed operating points that serve as a reasonable and complete inner bound of the strict PB compared with existing methods.Comment: 16 pages, 9 figures. Accepted for publication in IEEE Tans. Signal Process. June. 201