We explore experimentally whether the free-rider problem occurs in corporate takeovers. While Grossman and Hart's (1980) classical proposition states that due to the free-rider problem takeovers never succeed, we observe a considerable number of successful takeovers in real capital markets. To solve this paradox, we conducted an experimental study by constructing simple laboratory markets of atomistic shareholders.
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Paper provided by Osaka - Institute of Social and Economic Research in its series Papers with number
512.
Length: 46 pages Date of creation: 2000 Date of revision: Handle: RePEc:fth:osakae:512
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Find related papers by JEL classification: H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents G1 - Financial Economics - - General Financial Markets