Two problems: 1. Suppose two funds compete, and the both partake in a Dutch auction. They end up with having the same stock at the same price at the dutch auct

Two problems: 1. Suppose two funds compete, and the both partake in a Dutch auction. They end up with having the same stock at the same price at the dutch auction, and so the same income. However the free-rider gets fewer expenses so his profits are higher. The diligent fund is losing to the free rider in profits. After a while there are no more diligent funds. 2. The diligent fund prices stock at "proper" value, the free-rider prices it higher hoping to pay the lower, "proper" price but getting ahead of the diligent fund in the queue. If there are many free-riders they all end up in the queue before the diligent fund, so the latter may get less stock, or no stock at all. After a couple of such experiences the diligent funds stop partaking in any new Dutch auctions.