Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
I argue that overallocation is used as a marketing strategy to increase the offer price and aftermarket price of an initial public offering (IPO). I show that, when there is weak demand, it can be optimal for the underwriter to oversell an issue and take a naked short position. The issuing firm benefits from a higher expected offer price. This is in spite of the fact that, in equilibrium, allocating more shares when there is weak demand requires greater underpricing when there is strong demand.