Bidding with Securities: Comment

摘要

Peter M. DeMarzo, Ilan Kremer, and Andrzej Skrzypacz (2005, henceforth DKS) analyzed auctions in which bidders compete in securities, i.e., the winning bidder's payment includes a share of cash flow or (ex post) value generated from the auctioned object. With attention restricted to "feasible" securities, their main finding concerns the role of the "steepness" of securities in determining the seller's revenue. They show that the steeper the payment to the seller as a function of the realized value, the higher is the seller's expected revenue. A shift from a security-say, a debt-to a steeper one-say, equity or call option-"flattens" the surplus accruing to a bidder as a function of his future realized value, and this levels the competitive gaps between bidders. Hence, the competition becomes intensified.