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How to sell to buyers with crossholdings

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  • Loyola, Gino

Abstract

This paper characterizes the optimal selling mechanism in the presence of horizontal crossholdings. We find that this mechanism imposes a discrimination policy against the stronger bidders so that the seller´s expected revenue is increasing in both the common crossholding and the degree of asymmetry in crossholdings. Furthermore, it can be implemented by a sequential procedure that includes a price-preferences scheme and the possibility of an exclusive deal with the weakest bidder. We also show that a simple sequential negotiation mechanism, although suboptimal, yields a larger seller´s expected revenue than both the first-price and the second-price auctions.

Suggested Citation

  • Loyola, Gino, 2007. "How to sell to buyers with crossholdings," UC3M Working papers. Economics we075025, Universidad Carlos III de Madrid. Departamento de Economía.
  • Handle: RePEc:cte:werepe:we075025
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    Cited by:

    1. Loyola, Gino, 2012. "Optimal and efficient takeover contests with toeholds," Journal of Financial Intermediation, Elsevier, vol. 21(2), pages 203-216.
    2. Bartling, Björn & Netzer, Nick, 2016. "An externality-robust auction: Theory and experimental evidence," Games and Economic Behavior, Elsevier, vol. 97(C), pages 186-204.
    3. 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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    Keywords

    Optimal auctions;

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