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Calling the Price or Making the Call? Role Preferences in Texas Shootout Clauses

Author

Listed:
  • Bauch, Gerrit

    (Center for Mathematical Economics, Bielefeld University)

  • Müller, Lars

    (Center for Mathematical Economics, Bielefeld University)

Abstract

We analyze Texas Shootout clauses within an independent private values framework and characterize shareholders’ preferences over proposer and chooser roles. While the mechanism can generate efficiency gains relative to the status quo, asymmetries in role payoffs may deter shareholders from initiating dissolution. Using an ex-post perspective and allowing for risk aversion, unequal ownership shares, and heterogeneous valuation distributions, we establish conditions under which shareholders prefer being the chooser. We contribute to understanding why Texas Shootout clauses are rarely invoked in practice despite their ubiquity in partnership contracts and clarify when and why Texas Shootout clauses fail to function as intended

Suggested Citation

  • Bauch, Gerrit & Müller, Lars, 2026. "Calling the Price or Making the Call? Role Preferences in Texas Shootout Clauses," Center for Mathematical Economics Working Papers 760, Center for Mathematical Economics, Bielefeld University.
    • Handle: RePEc:bie:wpaper:760
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    File URL: https://pub.uni-bielefeld.de/download/3013519/3013520
    File Function: First Version, 2026
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