Bid Syndication: A Model with Application to Emission Permits Markets
Contracts involving bid syndication where small firms compete to enter a syndicate that pools product and shares ensuing payoffs from sales can be designed that lead to efficient participation and pricing solutions under incomplete information. These contracts combine syndicate sharing rules with bi...
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| Format: | text |
| Language: | English |
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Institutional Knowledge at Singapore Management University
2010
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| Online Access: | https://ink.library.smu.edu.sg/lkcsb_research_smu/62 https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1061&context=lkcsb_research_smu |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | Contracts involving bid syndication where small firms compete to enter a syndicate that pools product and shares ensuing payoffs from sales can be designed that lead to efficient participation and pricing solutions under incomplete information. These contracts combine syndicate sharing rules with bidding mechanisms to overcome informational asymmetries in syndicates while accomplishing horizontal risk sharing. The model bridges syndicate theory and bidding theory to derive propositions that aid in design of such processes, useful in design of bid syndication for emission trading where price discovery and size constraints exist. The firm’s decision to offer product such as permits for trade depends upon its private value for permits, minimum size of the permit block, and the financial burden of price discovery risk in permit markets. Increased supply in permits trading markets and lower permit prices can result as a consequence. |
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