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Auctions and Shareholdings

  • David ETTINGER

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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File URL: http://www.jstor.org/stable/27739825
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Article provided by ENSAE in its journal Annals of Economics and Statistics.

Volume (Year): (2008)
Issue (Month): 90 ()
Pages: 233-257

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Handle: RePEc:adr:anecst:y:2008:i:90:p:09
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  1. Pitchik, Carolyn & Schotter, Andrew, 1986. "Budget Constrained Sequential Auctions," Working Papers 86-21, C.V. Starr Center for Applied Economics, New York University.
  2. Marc S. Robinson, 1985. "Collusion and the Choice of Auction," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 141-145, Spring.
  3. Reynolds, Robert J. & Snapp, Bruce R., 1986. "The competitive effects of partial equity interests and joint ventures," International Journal of Industrial Organization, Elsevier, vol. 4(2), pages 141-153, June.
  4. Jeremy Bulow & Ming Huang & Paul Klemperer, 1999. "Toeholds and Takeovers," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 427-454, June.
  5. Carolyn Pitchik & Andrew Schotter, 1988. "Perfect Equilibria in Budget-Constrained Sequential Auctions: An Experimental Study," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 363-388, Autumn.
  6. Maasland, E. & Onderstal, A.M., 2002. "Auctions with Financial Externalities," Discussion Paper 2002-22, Tilburg University, Center for Economic Research.
  7. 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.
  8. María-Angeles de Frutos & Thomas Kittsteiner, 2008. "Efficient partnership dissolution under buy-sell clauses," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 184-198.
  9. Sudipto Dasgupta & Kevin Tsui, 2004. "Auctions with cross-shareholdings," Economic Theory, Springer, vol. 24(1), pages 163-194, 07.
  10. Jacob K. Goeree & Emiel Maasland & Sander Onderstal & John L. Turner, 2005. "How (Not) to Raise Money," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 897-926, August.
  11. Burkart, Mike, 1995. " Initial Shareholdings and Overbidding in Takeover Contests," Journal of Finance, American Finance Association, vol. 50(5), pages 1491-1515, December.
  12. 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.
  13. 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.
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