American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Bidding with Securities: Comment
American Economic Review
vol. 100,
no. 4, September 2010
(pp. 1929–35)
Abstract
Peter DeMarzo, Ilan Kremer, and Andrzej Skrzypacz (2005) analyzed auctions in which bidders compete in securities. They show that a steeper security leads to a higher expected revenue for the seller, and also use this to establish the revenue ranking between standard auctions. In this comment, we obtain the opposite results to DKS's by assuming that a higher return requires a higher investment cost. Given this latter assumption, steeper securities are more vulnerable to adverse selection, and may yield lower expected revenue, than flatter ones. (JEL D44 )Citation
Che, Yeon-Koo, and Jinwoo Kim. 2010. "Bidding with Securities: Comment." American Economic Review, 100 (4): 1929–35. DOI: 10.1257/aer.100.4.1929JEL Classification
- D44 Auctions