- Price versus quantity discrimination in optimal IPOs
- Number of pages
- Amsterdam / Rotterdam: Tinbergen Institute
- Tinbergen Institute Discussion Paper
- Volume | Edition (Serie)
- TI 2001-083/1
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
This paper addresses the issue of the choice of the optimalinstrument to sell new shares, this choice being price versusquantity discrimination (rationing). Previous results in theliterature (Benveniste and Wilhelm, 1990) show that the issuing firmwould be better off if allowed to use both price and quantitydiscrimination. This is not consistent with what we observe inpractice.Using a mechanism design approach, we derive endogenously the optimalIPO mechanism and show that it can be implemented through a uniform priceacross institutional investors and a uniform rationing, whenappropriate.
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