We study how competition impacts security-bid auctions by comparing Monopolistic and Competitive auctions. Sellers choose their security designs between debt and equity, and buyers select auctions based on sellers’ choices. We find that an auction’s security design has limited influence on revenue under monopoly, whereas equity substantially increases revenue under competition due to equity attracting more bidders. Despite this, sellers’ rate of choosing equity does not differ between the treatments. While theory suggests that security choice when acting as a buyer should be negatively correlated to one’s choice as a seller, we find the empirical correlation to be positive.
