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Auctions and Shareholdings

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  • David Ettinger

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.

Suggested Citation

  • David Ettinger, 2008. "Auctions and Shareholdings," Annals of Economics and Statistics, GENES, issue 90, pages 233-257.
  • Handle: RePEc:adr:anecst:y:2008:i:90:p:233-257
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    File URL: http://www.jstor.org/stable/27739825
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    References listed on IDEAS

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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. Sudipto Dasgupta & Kevin Tsui, 2004. "Auctions with cross-shareholdings," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(1), pages 163-194, July.
    3. 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.
    4. Emiel Maasland & Sander Onderstal, 2007. "Auctions with Financial Externalities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(3), pages 551-574, September.
    5. 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, August.
    6. 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.
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    Cited by:

    1. Bartling, Björn & Netzer, Nick, 2016. "An externality-robust auction: Theory and experimental evidence," Games and Economic Behavior, Elsevier, vol. 97(C), pages 186-204.
    2. repec:spr:jesaex:v:3:y:2017:i:1:d:10.1007_s40881-017-0037-y is not listed on IDEAS
    3. Loyola, Gino, 2012. "Optimal and efficient takeover contests with toeholds," Journal of Financial Intermediation, Elsevier, vol. 21(2), pages 203-216.
    4. Bagwell,K. & Mavroidis,P.C. & Staiger,R.W., 2003. "The case for auctioning countermeasures in the WTO," Working papers 14, Wisconsin Madison - Social Systems.
    5. David Ettinger, 2009. "Takeover Contests, Toeholds and Deterrence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 103-124, March.
    6. Ettinger, David, 2003. "Efficiency in auctions with crossholdings," Economics Letters, Elsevier, vol. 80(1), pages 1-7, July.
    7. Loyola, Gino, 2012. "Auctions vs. negotiations in takeovers with initial stakes," Finance Research Letters, Elsevier, vol. 9(3), pages 111-120.
    8. Philippe Jehiel & Benny Moldovanu, 2005. "Allocative and Informational Externalities in Auctions and Related Mechanisms," Levine's Bibliography 784828000000000490, UCLA Department of Economics.
    9. van Koten, Silvester, 2012. "Merchant interconnector projects by generators in the EU: Profitability and allocation of capacity," Energy Policy, Elsevier, vol. 41(C), pages 748-758.
    10. Bagwell, Kyle & Mavroidis, Petros C. & Staiger, Robert W., 2004. "The case for tradable remedies in WTO dispute settlement," Policy Research Working Paper Series 3314, The World Bank.
    11. Björn Bartling & Tobias Gesche & Nick Netzer, 2017. "Does the absence of human sellers bias bidding behavior in auction experiments?," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 3(1), pages 44-61, July.
    12. Silvester van Koten, 2006. "Bidding Behavior when One Bidder and the Auctioneer Are Vertically Integrated Implications for the Partial Deregulation of EU Electricity Markets," CERGE-EI Working Papers wp313, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    13. Loyola, Gino, 2008. "Optimal takeover contests with toeholds," UC3M Working papers. Economics we083217, Universidad Carlos III de Madrid. Departamento de Economía.

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