Lacking examples of initial public offering (IPO) mechanisms that are open to the public and priced competitively, previous studies could not determine what size discount, if any, is economically efficient. We compare two pricing regimes on the Tel Aviv Stock Exchange: an investor-driven Dutch auction limited by a binding maximum price replaced by one that is free of that constraint. Our evidence shows that rationing and herding disappear, improving the access of uninformed investors to strong issues and alleviating their exposure to losses attached to weak issues; pricing quality increases by the elimination of the underpricing bias, decreased price dispersion, and increased price sensitivity to IPO-unique factors. Underwriter services do not deteriorate but gamer moderately higher fees, apparently to compensate for a higher risk. Consistently, there is no deterioration in IPO efficiency as a screen from weak issues. Our evidence does not support the view that underpricing is competitive or efficient.