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By contrast, when bidders differ only in valuation distributions, optimal equity auctions feature more efficient allocations than optimal cash auctions.
Unlike optimal cash auctions (Myerson, 1981), where bidders' standalone values are irrelevant, the allocation of optimal equity auctions favors bidders with lower standalone values, because the seller can extract a larger proportion of their rents.
For instance, the optimal equity allocation is higher for a person with less volatile human capital, and vice versa.
Specifically, the optimal equity allocation decreases gradually from 61% at age 25 to 26% at age 65 as a person's human capital erodes and housing wealth and financial wealth rise.
Similarly, we found that human capital is correlated with the value factor and that region-specific housing wealth also affects the optimal equity weight". Translation: You may need to make some adjustments to your investment portfolio based on your career risk.
These approaches should be designed to help teachers and administrators understand not what they have to avoid but also what it is that they can do to achieve optimal equity moving forward.
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A natural question arises: What is the optimal debt-equity ratio?
This article examines the value of equity, optimal bankruptcy boundary, and optimal dividend policy in a continuous-time framework with finite time maturity.
9A related argument is that the equity-efficiency tradeoff is fixed, but the optimal balance of equity and efficiency has changed since 2007 because people became more risk-averse, at least temporarily.
The balance is optimal when customer equity is at its maximum amount.
Background: Deceased donor kidney allocation schemes are designed to balance optimal utility with equity of access.
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