The Czechoslovak Privatization Auction: An Empirical Investigation
- Creators
- Hillion, Pierre
- Young, David S.
Abstract
The 1992 Czechoslovak mass-privatization program resembled a multiround Walrasian auction with tatonnement in which participants, endowed with points, bid simultaneously for non-uniform products, i.e., shares. The creation of this artificial primary market provides economists with a unique opportunity to investigate empirically (1) the role and aims of the auctioneer in a politically-motivated giveaway scheme, (2) the price-setting mechanism, and (3) the bidding strategies and rationality of the auction's participants. Unlike more conventional auctions, price discovery was only a secondary motive to the auctioneer. The principal aim was to transfer the shares quickly to the investing public in a politically acceptable manner. We show that the price-updating rules adopted alter each bidding round did achieve the auctioneer's principal aim, but they also served to inject noise. The results suggest an inherent tradeoff between socially acceptable outcomes in such auctions and efficient price discovery.
Additional Information
The first draft of this paper was completed while the first author was a visiting professor at Caltech. We are grateful for comments and suggestions from seminar participants at the Australian Graduate School of Management, Caltech, Carnegie Mellon University, Cornell University, INSEAD, UCLA, the University of Lausanne, the University of Paris-Dauphine, the University of Southern California, the University of Toulouse, and the 1996 American Finance Association Meetings. We also thank P. Bossaerts, B. Gerard, A. Marcincin, M. Mejstrik, and M. Stepanek for helpful discussions and INSEAD for its financial support.Attached Files
Submitted - sswp921.pdf
Files
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Additional details
- Eprint ID
- 80627
- Resolver ID
- CaltechAUTHORS:20170818-143118005
- INSEAD
- Created
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2017-08-18Created from EPrint's datestamp field
- Updated
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2019-10-03Created from EPrint's last_modified field
- Caltech groups
- Social Science Working Papers
- Series Name
- Social Science Working Paper
- Series Volume or Issue Number
- 921