Auctions with Almost Common Values: The Wallet Game and its Applications
AbstractWe use a classroom game, the Wallet Game, to show that slight asymmetries between bidders can have very large effects on prices in standard ascending (i.e. English) auctions of common-values objects. Examples of small asymmetries are a small value advantage for one bidder or a small ownership of the object by one bidder. The effects of these asymmetries are greatly exacerbated by entry costs or bidding costs. We discuss applications to Airwaves Auctions and Takeover Battles including the Glaxo-Wellcome Merger.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 1998-W03.
Date of creation: 01 Sep 1997
Date of revision:
Auction theory; common values; winners curse; takeovers; mergers; corporate acquisitions; PCS auction; spectrum auction; airwaves auction.;
Other versions of this item:
- Klemperer, Paul, 1998. "Auctions with almost common values: The 'Wallet Game' and its applications," European Economic Review, Elsevier, Elsevier, vol. 42(3-5), pages 757-769, May.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
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