Financing auction bids
Publication
, Journal Article
Rhodes-Kropf, M; Viswanathan, S
Published in: RAND Journal of Economics
December 1, 2005
In many auctions, bidders do not have enough cash to pay their bid. If bidders have asymmetric cash positions and independent private values, then auctions will be inefficient. However, what happens if bidders have access to financial markets? We characterize efficient auctions and show that in an efficient auction the information rent that a bidder earns depends generally on both his valuation and his cash position. In contrast, a competitive capital market that is efficient must have information rents that depend only on valuation. This tension between information rents in an efficient auction and zero profits in a competitive equilibrium implies that most often, competitive financing is not efficient. Copyright © 2005, RAND.
Duke Scholars
Published In
RAND Journal of Economics
ISSN
0741-6261
Publication Date
December 1, 2005
Volume
36
Issue
4
Start / End Page
789 / 815
Related Subject Headings
- Economics
- 3803 Economic theory
- 3802 Econometrics
- 3801 Applied economics
- 14 Economics
Citation
APA
Chicago
ICMJE
MLA
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Rhodes-Kropf, M., & Viswanathan, S. (2005). Financing auction bids. RAND Journal of Economics, 36(4), 789–815.
Rhodes-Kropf, M., and S. Viswanathan. “Financing auction bids.” RAND Journal of Economics 36, no. 4 (December 1, 2005): 789–815.
Rhodes-Kropf M, Viswanathan S. Financing auction bids. RAND Journal of Economics. 2005 Dec 1;36(4):789–815.
Rhodes-Kropf, M., and S. Viswanathan. “Financing auction bids.” RAND Journal of Economics, vol. 36, no. 4, Dec. 2005, pp. 789–815.
Rhodes-Kropf M, Viswanathan S. Financing auction bids. RAND Journal of Economics. 2005 Dec 1;36(4):789–815.
Published In
RAND Journal of Economics
ISSN
0741-6261
Publication Date
December 1, 2005
Volume
36
Issue
4
Start / End Page
789 / 815
Related Subject Headings
- Economics
- 3803 Economic theory
- 3802 Econometrics
- 3801 Applied economics
- 14 Economics