Almost Common Value Auctions: The 'Wallet Game' and its Applications to Takeover Battles and Airwaves Auctions

Paul Klemperer

No 1682, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We use a classroom game, the ‘Wallet Game’, to show that in standard ascending, i.e. English, auctions of close-to-common-values objects, even slight asymmetries between bidders can have very large effects on prices. Examples of small asymmetries are a small value advantage for one bidder or a small ownership of the object by one bidder; the effects of these asymmetries are greatly exacerbated by entry costs or bidding costs. We discuss applications to airwaves auctions and takeover battles including the Glaxo-Wellcome merger.

Keywords: Airwaves Auction; Auction Theory; Common Values; Corporate Acquisitions; Mergers; PCS Auction; Spectrum Auction; Takeovers; Winner's Curse (search for similar items in EconPapers)
JEL-codes: D44 G34 L96 (search for similar items in EconPapers)
Date: 1997-08
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Citations: View citations in EconPapers (1)

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Working Paper: Almost Common Value Auctions: The "Wallet Game" and its Applications to Takeover Battles and Airwaves Auctions (1997)
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