Equilibrium Bid-Price Dispersion
Bibliographic Data
| ID | 10180840 |
|---|---|
| Authors | Boyan Jovanovic (New York University), Albert J Menkveld (0000-0002-9913-9242, Tinbergen Institute) |
| Year | 2021 |
| Volume | 130 |
| Issue | 2 |
| Pages | 426-461 |
| Publication date | 2021-10-01 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/717454 |
| OpenAlex | W3203470916 |
| Language | EN |
| References cited | 25 |
If bidding in a pure common-value auction is costly and bidders do not know how many others are also bidding, all equilibria are in mixed strategies. Participation is probabilistic, and bid prices are dispersed. The symmetric equilibrium is unique and yields simple analytic expressions. We use them to, for example, show that bid prices exhibit negative skew-ness. The expressions are further used to estimate the model based on bidding on a Standard & Poor’s 500 security. We find that the number of bidders declined over time, making liquidity supply fragile
Bid price · Bidding · Common value auction · Dispersion (optics · Econometrics · Economics · Market liquidity · Microeconomics · Monetary economics · Probabilistic logic · Simple (philosophy · Skewness · Statistics · Value (mathematics · Auction Theory and Applications · Consumer Market Behavior and Pricing · Finance · Financial Markets and Investment Strategies · Mathematics
| Citation velocity | historical |
|---|---|
| Highly cited | No |