Acquisitions as a real options bidding game
Han Smit (jsmit@few.eur.nl),
Ward van den Berg and
Wouter De Maeseneire
Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration
Abstract:
This paper uses a unified treatment of real options and game theory to examine the occurrence of bidding contests within a competitive environment of imperfect information and asymmetric bidders. Competing potential buyers may sequentially perform due diligence and incur costs (option premium) to become informed about their firm-specific target value (underlying value) before making a bid (exercise price). The first player’s bid reveals a signal on its own and the rival’s target value, thereby affecting the value of the rival’s option to bid on the target and the probability of a bidding contest. We find that bidding contests are more likely to take place between moderately correlated buyers, whereas rather diverse or just very similar buyers are less likely to compete.
Pages: 58 pages
Date: 2005-01
New Economics Papers: this item is included in nep-acc and nep-gth
References: Add references at CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
http://wps-feb.ugent.be/Papers/wp_05_289.pdf (application/pdf)
Related works:
Working Paper: Acquisitions as a Real Options Bidding Game (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:05/289
Access Statistics for this paper
More papers in Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Nathalie Verhaeghe (nathalie.verhaeghe@ugent.be).