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Compulsory Disclosure of Private Information Theoretical and Experimental Results for the "Acquiring-a-Company" Game

Author

Listed:
  • Werner Güth

    () (Max Planck Institute of Economics, Strategic Interaction Group)

  • Kerstin Pull

    () (University of Tübingen, School of Business and Economics)

  • Manfred Stadler

    () (University of Tübingen, School of Business and Economics)

  • Alexandra Zaby

    () (University of Tübingen, School of Business and Economics)

Abstract

Based on the "acquiring-a-company" game of Samuelson and Bazerman (1985), we theoretically and experimentally analyze the acquisition of a firm. Thereby we compare cases of symmetrically and asymmetrically informed buyers and sell- ers. This setting allows us to predict and test the effects of information disclosure as prescribed by two recently implemented directives of the European Union, the Transparency and the Takeover-Bid Directive. Our theoretical and experimental results suggest a welfare-enhancing effect of compulsory information disclosure. Hence, the EU Transparency and the EU Takeover-Bid Directive should both be welfare enhancing.

Suggested Citation

  • Werner Güth & Kerstin Pull & Manfred Stadler & Alexandra Zaby, 2014. "Compulsory Disclosure of Private Information Theoretical and Experimental Results for the "Acquiring-a-Company" Game," Jena Economic Research Papers 2014-003, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2014-003
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    References listed on IDEAS

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    1. Dennis A. V. Dittrich & Werner Güth & Martin G. Kocher & Paul Pezanis‐Christou, 2012. "Loss Aversion and Learning to Bid," Economica, London School of Economics and Political Science, vol. 79(314), pages 226-257, April.
    2. Nadine Chlaß, 2011. "On Individual Cursedness - How personality shapes individuals' sensitivity to incur a winner's curse -," Jena Economic Research Papers 2011-027, Friedrich-Schiller-University Jena.
    3. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    4. Ball, Sheryl B. & Bazerman, Max H. & Carroll, John S., 1991. "An evaluation of learning in the bilateral winner's curse," Organizational Behavior and Human Decision Processes, Elsevier, vol. 48(1), pages 1-22, February.
    5. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winner’s Curse," Experimental Economics, Springer;Economic Science Association, vol. 8(1), pages 5-20, April.
    6. Brit Grosskopf & Yoella Bereby-Meyer & Max Bazerman, 2007. "On the Robustness of the Winner’s Curse Phenomenon," Theory and Decision, Springer, vol. 63(4), pages 389-418, December.
    7. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
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    Cited by:

    1. D. Di Cagno & A. Galliera & W. Güth & N. Pace & L. Panaccione, 2016. "Make-up and suspicion in bargaining with cheap talk: An experiment controlling for gender and gender constellation," Theory and Decision, Springer, vol. 80(3), pages 463-471, March.

    More about this item

    Keywords

    Acquisition of firms; disclosure of private information; experimental economics;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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