The 18% increase was a result of the auction designs's flaws. Buyers of course have a demand curve but for this auction they were required to pick a single dem

The 18% increase was a result of the auction designs's flaws. Buyers of course have a demand curve but for this auction they were required to pick a single demand point. So, googles IPO price was $85. If I was a big buyer who actually bid 100,000 shares at $120 for the auction, I would have received my 100,000 shares at $85. But my demand is a curve - I would probably be willing to buy 125,000 shares at $100 or 175,000 shares at $85. So, the price increase on the first day was more due to bidders filling their demand at the IPO price. EDIT: here's a link to a more detailed explanation, also linked elsewhere on this page - http://optimalauctions.com/designing-a-better-google-ipo-auction.jsp http://optimalauctions.com/designing-a-better-google-ipo-auc...