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Auctions and shareholdings

  • Ettinger, David

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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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/5431.

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Date of creation: 2008
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Publication status: Published in Annales d'Economie et de Statistique, 2008, no. 90. pp. 233-257.Length: 24 pages
Handle: RePEc:dau:papers:123456789/5431
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  1. Emiel Maasland & Sander Onderstal, 2003. "Auctions with Financial Externalities," Working Papers 2003.30, Fondazione Eni Enrico Mattei.
  2. Sudipto Dasgupta & Kevin Tsui, 2004. "Auctions with cross-shareholdings," Economic Theory, Springer, vol. 24(1), pages 163-194, 07.
  3. 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.
  4. Maria Angeles de Frutos & Thomas Kittsteiner, 2004. "Efficient partnership dissolution under buy/sell clauses," Bonn Econ Discussion Papers bgse1_2004, University of Bonn, Germany, revised Jul 2004.
  5. Bulow, Jeremy I. & Huang, Ming & Klemperer, Paul, 1996. "Toeholds and Takeovers," CEPR Discussion Papers 1486, C.E.P.R. Discussion Papers.
  6. Burkart, Mike, 1995. " Initial Shareholdings and Overbidding in Takeover Contests," Journal of Finance, American Finance Association, vol. 50(5), pages 1491-1515, December.
  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. 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.
  9. 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.
  10. Marc S. Robinson, 1985. "Collusion and the Choice of Auction," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 141-145, Spring.
  11. Jehiel, Phillipe & Moldovanu, Benny, 1997. "Auctions with Downstream Interaction among Buyers," Sonderforschungsbereich 504 Publications 97-06, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  12. Pitchik, Carolyn & Schotter, Andrew, 1986. "Budget Constrained Sequential Auctions," Working Papers 86-21, C.V. Starr Center for Applied Economics, New York University.
  13. 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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