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How to sell to buyers with crossholdings

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  • Loyola, Gino

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 de Madrid in its series Open Access publications from Universidad Carlos III de Madrid with number info:hdl:10016/834.

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Handle: RePEc:ner:carlos:info:hdl:10016/834

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Web page: http://www.uc3m.es

Related research

Keywords: Optimal auctions; Crossholdings; Asymmetric auctions; Private values;

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Cited by:
  1. Gino Loyola, 2008. "Optimal takeover contests with toeholds," Economics Working Papers we083217, Universidad Carlos III, Departamento de Economía.

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