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American Economic Review: Vol. 100 No. 4 (September 2010)
AER Volume. 100, Issue 4 | 
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Bidding with Securities: Comment
Article Citation
Che, Yeon-Koo, and
Jinwoo Kim. 2010. "Bidding with Securities: Comment."
American Economic Review,
100(4): 1929-35.
DOI: 10.1257/aer.100.4.1929
DOI: 10.1257/aer.100.4.1929
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 )
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Authors
Che, Yeon-Koo (Columbia U and Yonsei Economic Research Institute, Yonsei U)
Kim, Jinwoo (Yonsei U)
Kim, Jinwoo (Yonsei U)
JEL Classifications
D44: Auctions
