Subscription of shares

The paper studies share subscription schemes and claims that these schemes are useful when it is desirable to let an item be held or a project be undertaken by a group of bidders. Examples of such instances include the privatization of state-owned enterprises, the introduction of strategic investors, the procurement of large government construction projects, the issuance of treasury bills, and the resolution of the banks' toxic assets. I show that these share subscription schemes result in sale prices that do approach the fundamental value as the number of bidders increases. This is in contrast to share auctions in Wilson (1979) in which the Nash-equilibrium sale price can yield a significantly lower sale price than a unit-auction.