A Rent Extraction Theory of Right of First Refusal
AbstractWhen a seller gives a buyer a right of first refusal, although it reduces the competing buyers' profits and creates an inefficiency, it always increases the joint profit of the seller and the right holder. Right of first refusal with a consideration (e.g., a payment from the right holder to the seller) allows the seller and the right holder to extract more surplus from the competing buyers
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Right of first refusal; bargaining; auctions;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
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