The two waves of voucher privatization in the Czech Republic: a model of learning in sequential bidding

This study develops a dynamic model of bidding behaviour to investigate the Czech voucher privatization process, which took place in two waves of bidding rounds, the first in 1992 and the second in 1994. It examines the voucher mechanism from the standpoint of investors and the pricing and allocation of shares. Investors could participate as independent individuals or by assigning some of all of their voucher points to investment privatization funds. Principal findings are that individual participants behaved differently from funds and benefited by learning from one round to the next and from observing the behaviour of the funds. An important collateral finding is that the market, though crude, behaved efficiently in the adjustment of share prices over the bidding rounds.