A Classroom Auction With Externalities: Applied to Mergers and Acquisitions

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A Classroom Auction With Externalities: Applied to Mergers and Acquisitions

Author Info

J. Patrick Meister () (Ithaca College)
Kyle J. Anderson (Indiana University, Kelley School of Business)

Abstract

The authors describe an in-class exercise in which students participate in an auction to buy US Airways. The exercise is based on events of late 1995, in which neither United nor American Airlines decided to bid for US Airways. Two teams of students participate in an English auction. Students learn that the equilibrium of the sequential game is that neither firm bid and, thereby, learn why US Airways did not sell at that time. In addition, two other teams participate in a sealed-bid auction, in which US Airways will sell in Nash equilibrium. Results typically have lined up with theoretical predictions.

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Publisher Info
Article provided by Helen Dwight Reid Foundation in its journal The Journal of Economic Education.

Volume (Year): 38 (2007)
Issue (Month): 3 ()
Pages: 297-307
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Handle: RePEc:jee:journl:v:38:y:2007:i:3:p:297-307

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Find related papers by JEL classification:
A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
L0 - Industrial Organization - - General
L7 - Industrial Organization - - Industry Studies: Primary Products and Construction

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Jehiel, Philippe & Moldovanu, Benny, 1995. "Negative Externalities May Cause Delay in Negotiation," Econometrica, Econometric Society, vol. 63(6), pages 1321-35, November. [Downloadable!] (restricted)
Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-29, September. [Downloadable!] (restricted)
Other versions:
- ehiel, Philippe & Benny Moldovanu & Ennio Stacchetti, 1994. "How (not) to sell nuclear weapons," Discussion Paper Serie B 288, University of Bonn, Germany.
Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December. [Downloadable!] (restricted)

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