The objective of this paper is to investigate the preferences of potential bidders in choosing between uniformand discriminatory auction pricing methods. Many financial assets, particularly government bonds, are issued in an auction. Uniform and discriminatory pricing constitute the two most popular mechanisms used in public auctions. Theoretical papers have not been able to provide an unequivocal preference of one mechanism over the other. This study investigates both bidder choice and the impact of that choice on the pricing outcome of the auction by allowing bidders to choose between the two alternative systems. The majority of the bidders in the survey prefer uniform pricing. Those preferring uniform auctions tend to bid more aggressively than those preferring discriminatory. On average, the proceeds to the issuer were higher under the uniform price mechanism.
|Original language||American English|
|Title of host publication||BEHAVIORAL FINANCE|
|Subtitle of host publication||WHERE DO INVESTORS’ BIASES COME FROM?|
|Publisher||World Scientific Publishing Co.|
|Number of pages||28|
|State||Published - 1 Jan 2016|
Bibliographical notePublisher Copyright:
© 2017 by World Scientific Publishing Co. Pte. Ltd.
- Discriminatory auction
- Treasury bonds
- Uniform auction