Similar bidders in takeover contests

Yun Dai, Sebastian Gryglewicz, Han T.J. Smit and Wouter De Maeseneire

Games and Economic Behavior, 2013, vol. 82, issue C, 544-561

Abstract: When bidders in a corporate takeover have related resources and post-acquisition strategies, their valuations of a target are likely to be interdependent. This paper analyzes sequential-entry takeover contests in which similar bidders have correlated private valuations. The level of similarity affects information content of bids and bidding competition. Our model predicts that expected acquisition prices and the probability of multiple-bidder contests are the highest for intermediately similar bidders. We test these predictions in laboratory experiments in which we control the similarity between bidders. The experimental data confirm the non-monotonic effects of similarity on prices and on the frequency of multiple-bidder contents.

Keywords: Takeover contests; Interdependent valuations; Information externality; Competition intensity; Experiment (search for similar items in EconPapers)
JEL-codes: D03 D44 G34 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0899825613001279
Full text for ScienceDirect subscribers only

Related works:
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:eee:gamebe:v:82:y:2013:i:c:p:544-561

DOI: 10.1016/j.geb.2013.08.010

Access Statistics for this article

Games and Economic Behavior is currently edited by E. Kalai

More articles in Games and Economic Behavior from Elsevier
Bibliographic data for series maintained by Catherine Liu ().