How to sell to buyers with crossholdings
AbstractThis paper characterizes the optimal selling mechanism in the presence of horizontal crossholdings. We find that this mechanism imposes a discrimination policy against the stronger bidders so that the seller´s expected revenue is increasing in both the common crossholding and the degree of asymmetry in crossholdings. Furthermore, it can be implemented by a sequential procedure that includes a price-preferences scheme and the possibility of an exclusive deal with the weakest bidder. We also show that a simple sequential negotiation mechanism, although suboptimal, yields a larger seller´s expected revenue than both the first-price and the second-price auctions.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we075025.
Date of creation: May 2007
Date of revision:
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- Björn Bartling & Nick Netzer, 2014. "An Externality-Robust Auction: Theory and Experimental Evidence," CESifo Working Paper Series 4771, CESifo Group Munich.
- Björn Bartling & Nick Netzer, 2014. "An externality-robust auction: theory and experimental evidence," ECON - Working Papers, Department of Economics - University of Zurich 153, Department of Economics - University of Zurich.
- Gino Loyola, 2008. "Optimal takeover contests with toeholds," Economics Working Papers we083217, Universidad Carlos III, Departamento de Economía.
- Lu, Jingfeng, 2012. "Optimal auctions with asymmetric financial externalities," Games and Economic Behavior, Elsevier, Elsevier, vol. 74(2), pages 561-575.
- Loyola, Gino, 2012. "Optimal and efficient takeover contests with toeholds," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 21(2), pages 203-216.
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