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How to sell to buyers with crossholdings

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  • Gino Loyola

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Abstract

This 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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File URL: http://e-archivo.uc3m.es/bitstream/10016/834/1/we075025.pdf
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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we075025.

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Date of creation: May 2007
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Handle: RePEc:cte:werepe:we075025

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Cited by:
  1. 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.
  2. Loyola, Gino, 2012. "Optimal and efficient takeover contests with toeholds," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 21(2), pages 203-216.
  3. Lu, Jingfeng, 2012. "Optimal auctions with asymmetric financial externalities," Games and Economic Behavior, Elsevier, Elsevier, vol. 74(2), pages 561-575.
  4. Gino Loyola, 2008. "Optimal takeover contests with toeholds," Economics Working Papers, Universidad Carlos III, Departamento de Economía we083217, Universidad Carlos III, Departamento de Economía.
  5. Björn Bartling & Nick Netzer, 2014. "An Externality-Robust Auction: Theory and Experimental Evidence," CESifo Working Paper Series 4771, CESifo Group Munich.

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