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Auctions and shareholdings

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  • David Ettinger

    ()
    (LEDa - Laboratoire d'Economie de Dauphine - Université Paris IX - Paris Dauphine, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine)

Abstract

This paper examines how shareholdings affect auctions' revenue and efficiency with independent private values. Two types of shareholdings are analyzed: Vertical (resp: horizontal) toeholds cover situations in which bidders own a fraction of the seller's profit (resp: a share of their competitor's profit). Expected revenue is an increasing (resp: decreasing) function of vertical (resp: horizontal) toeholds. With both types of toeholds, auction formats are not revenue equivalent. Expected revenue is affected to a greater extent by the presence of toeholds in the second price auction than in the first-price auction.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number hal-00701303.

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Date of creation: 2008
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Publication status: Published, Annales d'Economie et Statistiques, 2008, 90, 1-23
Handle: RePEc:hal:journl:hal-00701303

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00701303
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Keywords: auctions ; private values ; toeholds ; revenue comparison;

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References

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  1. María Angeles de Frutos & Thomas Kittsteiner, 2006. "Efficient partnership dissolution under buy-sell clauses," Economics Working Papers we072816, Universidad Carlos III, Departamento de Economía.
  2. Burkart, Mike, 1995. " Initial Shareholdings and Overbidding in Takeover Contests," Journal of Finance, American Finance Association, American Finance Association, vol. 50(5), pages 1491-1515, December.
  3. Jeremy Bulow & Ming Huang & Paul Klemperer, 1996. "Toeholds and Takeovers," Finance, EconWPA 9608001, EconWPA.
  4. Pitchik, Carolyn & Schotter, Andrew, 1986. "Perfect Equilibria in Budget Constrained Sequential Auctions: An Experimental Study," Working Papers, C.V. Starr Center for Applied Economics, New York University 86-22, C.V. Starr Center for Applied Economics, New York University.
  5. Pitchik, Carolyn & Schotter, Andrew, 1986. "Budget Constrained Sequential Auctions," Working Papers, C.V. Starr Center for Applied Economics, New York University 86-21, C.V. Starr Center for Applied Economics, New York University.
  6. Philippe Jehiel & Benny Moldovanu, 2000. "Auctions with Downstream Interaction Among Buyers," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 768-791, Winter.
  7. Marc S. Robinson, 1985. "Collusion and the Choice of Auction," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 141-145, Spring.
  8. Emiel Maasland & Sander Onderstal, 2003. "Auctions with Financial Externalities," Working Papers 2003.30, Fondazione Eni Enrico Mattei.
  9. Reynolds, Robert J. & Snapp, Bruce R., 1986. "The competitive effects of partial equity interests and joint ventures," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 4(2), pages 141-153, June.
  10. Maxim Engers & Brian McManus, 2007. "Charity Auctions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 953-994, 08.
  11. Jacob K. Goeree & Emiel Maasland & Sander Onderstal & John L. Turner, 2005. "How (Not) to Raise Money," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(4), pages 897-926, August.
  12. Sudipto Dasgupta & Kevin Tsui, 2004. "Auctions with cross-shareholdings," Economic Theory, Springer, Springer, vol. 24(1), pages 163-194, 07.
  13. Singh, Rajdeep, 1998. "Takeover Bidding with Toeholds: The Case of the Owner's Curse," Review of Financial Studies, Society for Financial Studies, vol. 11(4), pages 679-704.
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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. Loyola, Gino, 2012. "Auctions vs. negotiations in takeovers with initial stakes," Finance Research Letters, Elsevier, Elsevier, vol. 9(3), pages 111-120.
  4. 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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