Why Do IPO Auctions Fail?

The authors document a somewhat surprising regularity: of the many countries that have used IPO auctions, virtually all have abandoned them. The common explanations given for the lack of popularity of the auction method in the U.S., viz., issuer reluctance to try a new experimental method, and underwriter pressure towards methods that lead to higher fees, do not fit the evidence. The authors examine why auctions have failed and verify, to the extent possible, that they are consistent with what academic theory predicts.