Article ID: | iaor200973215 |
Volume: | 1 |
Issue: | 2 |
Start Page Number: | 96 |
End Page Number: | 117 |
Publication Date: | Jun 2009 |
Journal: | Iranian Journal of Operations Research |
Authors: | Seifi Abbas, Zamanian Morteza |
Keywords: | investment |
We propose a mechanism to deal with the asymmetric information which increases the phenomenon of underpricing in the Initial Public Offering (IPO) transactions. In this regard, we develop a truthful screening mechanism by which a screening agent could assess a firm that is going to be public during an IPO. A mathematical model is developed and solved to determine the incentives of these agencies so that they find it optimal to perform truthfully. We also pursue the case of cooperation of n such agents and compare it with the situation in which each agent works independently.