Fioriti, Andrés (2016) Essays on bidding with securities. PhD thesis, University of Warwick.

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Abstract

Chapter 1 partially surveys auctions with contingent contracts, i.e., contracts in which payments are allowed to depend on an ex-post verifiable variable, such as revenues. The review starts with the seminal paper of DeMarzo et al. (2005) and partially departs from Skrzypacz (2013) by analyzing on externalities and risk aversion concerns. A partial ranking of auction revenues for auctions that differ in terms of contract forms, pricing rules and seller commitment are described. Models incorporating adverse selection, moral hazard, competition between auctioneers, externalities and risk aversion are discussed.

In Chapter 2 we study second price auctions, where buyers compete for the allocation of a project, by bidding securities over project's realized value. In addition, we allow for negative externalities, which are suffered by the losers in case the winner implements the project. Under this environment, we introduce two payment instruments: the Fixed-Equity Hybrid -which embeds cash- and the Fixed-Cash
Hybrid -which embeds equity. As our main result, we rank the instruments in terms of revenue, and show that the fixed-equity hybrid is the best instrument whereas equity is the worst despite being the most sensitive instrument to bidders' true type.

Finally, in Chapter 3 second-price auctions, where buyers compete for the allocation of a project, by bidding securities over project's realized value are studied. In addition, bidders are allowed to be asymmetric not only with respect to their underlying distribution of payoffs but also with respect to their risk aversion. Under this environment, it is shown that steeper securities provide higher insurance. As a main result, the instruments are ranked in terms of efficiency, and shows that the steepest security minimizes the efficiency loss when bidders are indeed asymmetric. Moreover, steeper securities are shown to increase revenue for the seller as in DeMarzo et al. (2005).

Item Type:	Thesis or Dissertation (PhD)
Subjects:	H Social Sciences > HF Commerce
Library of Congress Subject Headings (LCSH):	Securities, Auctions -- Mathematical models
Official Date:	August 2016
Dates:	Date Event August 2016 Submitted
Institution:	University of Warwick
Theses Department:	Department of Economics
Thesis Type:	PhD
Publication Status:	Unpublished
Supervisor(s)/Advisor:	Kremer, Ilan ; Beker, Pablo
Format of File:	pdf
Extent:	90 leaves : illustrations
Language:	eng

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