Investigation of the Impact of Decision Parameters for a Dutch Auction Simulation For IPO Issues

Abstract

Development of e-commerce has been proceeding at a furious pace over the past half a decade. Most companies now have a website and are conducting e-commerce. The move from bricks-and-mortar to clicks-and-mortar, if not pure play or virtual corporations is on in full swing. E-commerce applications span the gamut from basic buying/selling in the corporate world to e-government. Auction sites like e-bay have proved to be enormously successful. Auctions have been a part of traditional commerce ranging from the popular Christie’s and Sotheby’s to the government’s auctions of bonds and T-bills. Companies that come out with their initial public offering are now conducting Internet road shows in their bid to maximize public subscription to their issues. This paper deals with one such application of doing online IPO exercises. This paper describes the design of a web-based Dutch auction simulation to teach the students the intricacies of pricing and stock evaluation for new initial public offerings as a part of the course in e-commerce Finance. A Monte-Carlo simulation was exercise is conducted to determine the impact of the game decision parameters on portfolio performance. Results are presented