The scope of auctions in the presence of downstream interactions and information externalities
Onur Koska (),
Ilke Onur () and
Frank Stähler ()
Journal of Economics, 2018, vol. 125, issue 2, No 1, 107-136
Abstract We scrutinize the scope of auctions for firm acquisitions in the presence of downstream interactions and information externalities. We show that no mechanism exists that allows an investor to acquire a low-cost firm under incomplete information: a separating auction implies adverse selection and relies substantially on commitment to allocation and transfer rules. A pooling auction serves as a commitment device against ex-post opportunistic behavior and alleviates adverse selection. It can earn the investor a higher expected payoff than a separating auction, even when consistency is required as to qualify for a sequential equilibrium.
Keywords: Takeover; Auction; Externality; Incomplete information; Commitment (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s00712-017-0590-0 Abstract (text/html)
Working Paper: The Scope of Auctions in the Presence of Downstream Interactions and Information Externalities (2016)
Working Paper: The Scope of Auctions in the Presence of Downstream Interactions and Information Externalities (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:125:y:2018:i:2:d:10.1007_s00712-017-0590-0
Access Statistics for this article
Journal of Economics is currently edited by Giacomo Corneo
More articles in Journal of Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().