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Silent interests and all-pay auctions
[Verborgene Interessen und "All-Pay" Auktionen Befinden sich Firmen im Wettkampf in "All-Pay" Auktionen]

  • Konrad, Kai Andreas

If firms compete in all-pay auctions with complete information, silent shareholdings introduce asymmetric externalities into the all-pay auction framework. If the strongest firm owns a large share in the second strongest firm, this may make the strongest firm abstain from bidding. As a consequence, equilibrium profits of both firms may increase, but the prize may be allocated less efficiently. The reverse ownership structure is also likely to increase the profits of the firms involved in the ownership relationship but without these negative efficiency effects.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Market Processes and Governance with number SP II 2005-10.

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Date of creation: 2005
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Handle: RePEc:zbw:wzbmpg:spii200510
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