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A Classroom Auction With Externalities: Applied to Mergers and Acquisitions


  • J. Patrick Meister
  • Kyle J. Anderson


The authors describe an in-class exercise in which students participate in an auction to buy US Airways. The exercise is based on events of late 1995, in which neither United nor American Airlines decided to bid for US Airways. Two teams of students participate in an English auction. Students learn that the equilibrium of the sequential game is that neither firm bid and, thereby, learn why US Airways did not sell at that time. In addition, two other teams participate in a sealed-bid auction, in which US Airways will sell in Nash equilibrium. Results typically have lined up with theoretical predictions.

Suggested Citation

  • J. Patrick Meister & Kyle J. Anderson, 2007. "A Classroom Auction With Externalities: Applied to Mergers and Acquisitions," The Journal of Economic Education, Taylor & Francis Journals, vol. 38(3), pages 297-307, July.
  • Handle: RePEc:taf:jeduce:v:38:y:2007:i:3:p:297-307
    DOI: 10.3200/JECE.38.3.297-307

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    Cited by:

    1. Juan Luis Jiménez & Jordi Perdiguero & Ancor Suárez, 2011. "Debating as a classroom tool for adapting learning outcomes to the European higher education area," IREA Working Papers 201109, University of Barcelona, Research Institute of Applied Economics, revised Jun 2011.

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