Security auctions with cash- and equity-bids: An experimental study

We study the performance of cash- and equity-bid security auctions in an experiment using first- and second-price pricing rules. Theory predicts revenue equivalence between first- and second-price formats, equity auctions to generate more revenue than cash auctions, and for all formats to be efficient. We find that, on average, the first-price equity auction produces higher revenues than the other formats. However, relative to equilibrium, equity auctions perform worse than cash auctions. Furthermore, all formats display deviations from ex ante efficiency, yet these deviations are not statistically distinguishable from one another.