Equilibrium Signal and Purchase Decision in China’s IPO Net Roadshow: A Dynamic Game Approach
The net roadshow has been dominant in China’s IPO (initial public offerings) roadshow structure. Considering the dynamic game with incomplete information between the issuer and investor during China’s IPO net roadshow, the quality of the letter of intent is presented as a discrete signal in this pap...
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| Format: | Article |
| Language: | English |
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Wiley
2016-01-01
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| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2016/6327308 |
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| author | Yi Zhao Dong Li |
| author_facet | Yi Zhao Dong Li |
| author_sort | Yi Zhao |
| collection | DOAJ |
| description | The net roadshow has been dominant in China’s IPO (initial public offerings) roadshow structure. Considering the dynamic game with incomplete information between the issuer and investor during China’s IPO net roadshow, the quality of the letter of intent is presented as a discrete signal in this paper in accordance with China’s IPO net roadshow characteristics. A signaling game model is established to conclude the issuer’s equilibrium signal and the investor’s purchase action. The issuer disguised a letter of intent to uplift its quality if the disguising cost per share stands below the bidding spread. If the investor judges the letter of intent as high-quality, the basis of purchase is that the opportunity cost per share is less than the expectation on the intrinsic value of the IPO stock. Otherwise the investor rejects purchasing on the condition that the opportunity cost outnumbers the valuation of intrinsic value. In conclusion, there exist unique separating equilibrium and pooling equilibrium as a perfect Bayesian Nash equilibrium, and the existence and uniqueness of their equilibrium domains have been verified by numerical simulation. Finally, the comprehensive empirical studies have validated only one separating and pooling equilibrium existing in China’s real-world IPO market. |
| format | Article |
| id | doaj-art-6b8c1ae39ce548479bf1f234f706fee4 |
| institution | Kabale University |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2016-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-6b8c1ae39ce548479bf1f234f706fee42025-02-03T01:03:47ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2016-01-01201610.1155/2016/63273086327308Equilibrium Signal and Purchase Decision in China’s IPO Net Roadshow: A Dynamic Game ApproachYi Zhao0Dong Li1School of Management, Harbin Institute of Technology, Harbin 150001, ChinaSchool of Management, Harbin Institute of Technology, Harbin 150001, ChinaThe net roadshow has been dominant in China’s IPO (initial public offerings) roadshow structure. Considering the dynamic game with incomplete information between the issuer and investor during China’s IPO net roadshow, the quality of the letter of intent is presented as a discrete signal in this paper in accordance with China’s IPO net roadshow characteristics. A signaling game model is established to conclude the issuer’s equilibrium signal and the investor’s purchase action. The issuer disguised a letter of intent to uplift its quality if the disguising cost per share stands below the bidding spread. If the investor judges the letter of intent as high-quality, the basis of purchase is that the opportunity cost per share is less than the expectation on the intrinsic value of the IPO stock. Otherwise the investor rejects purchasing on the condition that the opportunity cost outnumbers the valuation of intrinsic value. In conclusion, there exist unique separating equilibrium and pooling equilibrium as a perfect Bayesian Nash equilibrium, and the existence and uniqueness of their equilibrium domains have been verified by numerical simulation. Finally, the comprehensive empirical studies have validated only one separating and pooling equilibrium existing in China’s real-world IPO market.http://dx.doi.org/10.1155/2016/6327308 |
| spellingShingle | Yi Zhao Dong Li Equilibrium Signal and Purchase Decision in China’s IPO Net Roadshow: A Dynamic Game Approach Discrete Dynamics in Nature and Society |
| title | Equilibrium Signal and Purchase Decision in China’s IPO Net Roadshow: A Dynamic Game Approach |
| title_full | Equilibrium Signal and Purchase Decision in China’s IPO Net Roadshow: A Dynamic Game Approach |
| title_fullStr | Equilibrium Signal and Purchase Decision in China’s IPO Net Roadshow: A Dynamic Game Approach |
| title_full_unstemmed | Equilibrium Signal and Purchase Decision in China’s IPO Net Roadshow: A Dynamic Game Approach |
| title_short | Equilibrium Signal and Purchase Decision in China’s IPO Net Roadshow: A Dynamic Game Approach |
| title_sort | equilibrium signal and purchase decision in china s ipo net roadshow a dynamic game approach |
| url | http://dx.doi.org/10.1155/2016/6327308 |
| work_keys_str_mv | AT yizhao equilibriumsignalandpurchasedecisioninchinasiponetroadshowadynamicgameapproach AT dongli equilibriumsignalandpurchasedecisioninchinasiponetroadshowadynamicgameapproach |