Preemptive bidding in takeover auctions with affiliated values

Yuri Khoroshilov

The Quarterly Review of Economics and Finance, 2012, vol. 52, issue 4, 395-401

Abstract: This paper extends Fishman's (1988) model of preemptive bidding in takeover auctions to auctions with affiliated values. It shows that preemptive bidding transfers wealth from the seller to the first bidder without affecting the profit of the second bidder and social welfare. It also shows that higher correlation between bidders’ values leads to higher preemption rates but has an ambiguous effect on the size of the opening bid. Finally, it shows that in auctions with affiliated values, even infinitesimal entry costs may lead to a preemptive jump bidding that allows the reallocation of the entire surplus from the seller to the first bidder.

Keywords: Jump bidding; Takeover auction (search for similar items in EconPapers)
JEL-codes: C72 D44 G34 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:52:y:2012:i:4:p:395-401

DOI: 10.1016/j.qref.2012.09.001

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