Why Do Sellers (Usually) Prefer Auctions?

Jeremy Bulow and Paul Klemperer

No 7411, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We compare the most common methods for selling a company or other asset when participation is costly: a simple simultaneous auction, and a sequential process in which potential buyers decide in turn whether or not to enter the bidding. The sequential process is always more efficient. But pre-emptive bids transfer surplus from the seller to buyers. Because the auction is more conducive to entry - precisely because of its inefficiency - it usually generates higher expected revenue. We also discuss the effects of lock-ups, matching rights, break-up fees (as in takeover battles), entry subsidies, etc.

Keywords: Auctions; Entry; Jump bidding; Procurement; Sequential sales (search for similar items in EconPapers)
JEL-codes: D44 G34 L13 (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (100)

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Related works:
Journal Article: Why Do Sellers (Usually) Prefer Auctions? (2009)
Working Paper: Why Do Sellers (Usually) Prefer Auctions? (2009)
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