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Preemptive bidding and Pareto efficiency in takeover auctions

Anna Dodonova

Economics Letters, 2017, vol. 159, issue C, 214-216

Abstract: This paper extends the Fishman (1988) model of preemptive jump bidding in private value takeover auction to auctions with common and affiliated values. We show that in the presence of a common value component, jump bidding equilibrium results in higher social surplus. Furthermore, we show that, under certain conditions, allowing for preemptive jump bidding in common value auctions results in ex-ante Pareto improvement.

Keywords: Auction; Acquisition; Takeover; Preemptive bidding; Jump bidding (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ecolet:v:159:y:2017:i:c:p:214-216