The Price of Priority: Investor Sophistication and Endogenous Bidding Costs in Primary Markets

The Price of Priority: Investor Sophistication and Endogenous Bidding Costs in Primary Markets | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article The Price of Priority: Investor Sophistication and Endogenous Bidding Costs in Primary Markets Oliver Padmaperuma, Andre Guettler This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-9372196/v1 This work is licensed under a CC BY 4.0 License Status: Under Review Version 1 posted 5 You are reading this latest preprint version Abstract Not all investors pay the same effective price for allocation priority in competitive primary markets. We study primary digital asset issuances on the Ethereum blockchain, where competitive fee payments determine allocation order and public ledger records allow every participant to be individually tracked, with observable bidding behavior, transaction history, and realized outcomes at a scale and completeness not attainable in traditional primary market settings. We document that higher bidding intensity substantially reduces realized returns and that investor sophistication, constructed from each participant's own transaction history, meaningfully moderates this cost. Market tenure is the decisive channel: accumulated participation predicts bidding discipline far better than demonstrated past performance, consistent with learning-by-doing rather than innate skill or private information. JEL Classification: D44, D82, G12, G14, G40. Primary markets Bidder heterogeneity Endogenous bidding costs Investor sophistication Priority fees Non-fungible tokens Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Under Review Version 1 posted Reviewers agreed at journal 11 May, 2026 Reviewers invited by journal 07 May, 2026 Editor assigned by journal 15 Apr, 2026 Submission checks completed at journal 15 Apr, 2026 First submitted to journal 09 Apr, 2026 You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-9372196","acceptedTermsAndConditions":true,"allowDirectSubmit":false,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":638049648,"identity":"fb040202-3bb2-4556-a94a-09f182ce8e8b","order_by":0,"name":"Oliver Padmaperuma","email":"data:image/png;base64,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","orcid":"","institution":"University of Ulm","correspondingAuthor":true,"prefix":"","firstName":"Oliver","middleName":"","lastName":"Padmaperuma","suffix":""},{"id":638049650,"identity":"822ab63b-cafe-4184-9568-1b2ca6da2946","order_by":1,"name":"Andre Guettler","email":"","orcid":"","institution":"University of Ulm","correspondingAuthor":false,"prefix":"","firstName":"Andre","middleName":"","lastName":"Guettler","suffix":""}],"badges":[],"createdAt":"2026-04-09 20:08:31","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-9372196/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-9372196/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":109759623,"identity":"c6d273d5-1393-4101-a318-61edec3bc159","added_by":"auto","created_at":"2026-05-22 07:27:27","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":319351,"visible":true,"origin":"","legend":"","description":"","filename":"PAPERThePriceofPriorityInvestorSophisticationandEndogenousBiddingCostsinPrimaryMarketsfinal.pdf","url":"https://assets-eu.researchsquare.com/files/rs-9372196/v1_covered_28a52dff-16eb-431f-be5c-569b27207483.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"The Price of Priority: Investor Sophistication and Endogenous Bidding Costs in Primary Markets","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":false,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"financial-markets-and-portfolio-management","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":false,"externalIdentity":"fmpm","sideBox":"Learn more about [Financial Markets and Portfolio Management](http://link.springer.com/journal/11408)","snPcode":"11408","submissionUrl":"https://submission.springernature.com/new-submission/11408/3","title":"Financial Markets and Portfolio Management","twitterHandle":"","acdcEnabled":true,"dfaEnabled":true,"editorialSystem":"stoa","reportingPortfolio":"Springer Hybrid","inReviewEnabled":true,"inReviewRevisionsEnabled":false},"keywords":"Primary markets, Bidder heterogeneity, Endogenous bidding costs, Investor sophistication, Priority fees, Non-fungible tokens","lastPublishedDoi":"10.21203/rs.3.rs-9372196/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-9372196/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eNot all investors pay the same effective price for allocation priority in competitive primary markets. 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