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Silent Interests and All-Pay Auctions

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Author Info
Kai A. Konrad ()

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Abstract

If firms compete in all-pay auctions with complete information, silent shareholdings introduce asymmetric externalities into the all-pay auction framework. If the strongest firm owns a large share in the second strongest firm, this may make the strongest firm abstain from bidding. As a consequence, equilibrium profits of both firms may increase, but the prize may be allocated less efficiently. The reverse ownership structure is also likely to increase the profits of the firms involved in the ownership relationship but without these negative efficiency effects.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 1473.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1473

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Related research
Keywords: all-pay auctions externalities contests silent minority shareholdings ownership structure

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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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.:
  1. Kwoka, John E, Jr, 1992. "The Output and Profit Effects of Horizontal Joint Ventures," Journal of Industrial Economics, Blackwell Publishing, vol. 40(3), pages 325-38, September. [Downloadable!] (restricted)
  2. Baye, M.R. & Kovenock, D. & De Vries, C., 1992. "The All-Pay Auction with Complete Information," Papers 8-92-1, Pennsylvania State - Department of Economics.
    Other versions:
  3. Tilman Börgers & Christian Dustmann, 2003. "Awarding telecom licences: the recent European experience," Economic Policy, CEPR, CES, MSH, vol. 18(36), pages 215-268, 04. [Downloadable!] (restricted)
  4. Ettinger, David, 2003. "Efficiency in auctions with crossholdings," Economics Letters, Elsevier, vol. 80(1), pages 1-7, July. [Downloadable!] (restricted)
  5. Sudipto Dasgupta & Kevin Tsui, 2004. "Auctions with cross-shareholdings," Economic Theory, Springer, vol. 24(1), pages 163-194, 07. [Downloadable!] (restricted)
  6. Huck, Steffen & Konrad, Kai A. & Muller, Wieland, 2001. "Divisionalization in contests," Economics Letters, Elsevier, vol. 70(1), pages 89-93, January. [Downloadable!] (restricted)
    Other versions:
  7. Malueg, David A., 1992. "Collusive behavior and partial ownership of rivals," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 27-34, March. [Downloadable!] (restricted)
  8. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1992. "Rigging the Lobbying Process: An Application of the All- Pay Auction," Papers 9-92-2, Pennsylvania State - Department of Economics.
    Other versions:
  9. David Ettinger, 2003. "Bidding among Friends and Enemies," Working Papers 2003.23, Fondazione Eni Enrico Mattei. [Downloadable!]
  10. Flath, David, 1991. "When is it rational for firms to acquire silent interests in rivals?," International Journal of Industrial Organization, Elsevier, vol. 9(4), pages 573-583, December. [Downloadable!] (restricted)
  11. Konrad, Kai A., 2000. "Trade contests," Journal of International Economics, Elsevier, vol. 51(2), pages 317-334, August. [Downloadable!] (restricted)
  12. 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)
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  13. Joseph Farrell & Carl Shapiro, 1990. "Asset Ownership and Market Structure in Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 275-292, Summer. [Downloadable!] (restricted)
  14. Anbarci, Nejat & Lemke, Robert & Roy, Santanu, 2002. "Inter-firm complementarities in R&D: a re-examination of the relative performance of joint ventures," International Journal of Industrial Organization, Elsevier, vol. 20(2), pages 191-213, February. [Downloadable!] (restricted)
  15. Baik, Kyung Hwan & Kim, In-Gyu & Na, Sunghyun, 2001. "Bidding for a group-specific public-good prize," Journal of Public Economics, Elsevier, vol. 82(3), pages 415-429, December. [Downloadable!] (restricted)
  16. Simon P. Anderson & Jacob K. Goeree & Charles A. Holt, 1998. "Rent Seeking with Bounded Rationality: An Analysis of the All-Pay Auction," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 828-853, August. [Downloadable!] (restricted)
  17. Reitman, David, 1994. "Partial Ownership Arrangements and the Potential for Collusion," Journal of Industrial Economics, Blackwell Publishing, vol. 42(3), pages 313-22, September. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Andrea Fosfuri & Thomas Rønde, 2005. "Leveraging Resistance to Change and the Skunk Works Model of Innovation," CIE Discussion Papers 2007-10, University of Copenhagen. Department of Economics. Centre for Industrial Economics, revised Jun 2007. [Downloadable!]
  2. Frode Meland & Odd Rune Straume, 2006. "Outsourcing in Contests," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
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