A Sealed-Bid Auction That Matches the English Auction

This paper analyzes a two-stage sealed-bid auction that is frequently employed in privatization, takeover, and merger and acquisition contests. This auction format yields the same expected revenue as the open ascending (English) auction, yet is less susceptible to preemptive bidding and collusion. Journal of Economic Literature Classification Number: D44.     

Reputation and Imperfectly Observable Commitment: The Chain Store Paradox Revisited

This paper reconsiders Selten's famous chain store paradox and its solution by Kreps and Wilson, which is based on entrants' uncertainty concerning the incumbent monopolist's predisposition to fight entry. Following Milgrom and Roberts, we interpret the predisposition to fight entry as the result of a rationally chosen commitment. However, commitment is imperfectly observable. Other assumptions are maintained. We show that a rational monopolist never fights entry, even if he may commit himself to an aggressive course of action. Entry occurs in all markets and is never fought. Hence, Selten's chain store paradox comes back in full force.     

The Value Relevance of Mandatory Non‐GAAP Earnings

This paper examines the value relevance of earnings components where there is a mandatory requirement to report generally accepted accounting principles (GAAP) earnings and non‐GAAP earnings, and where the items to be eliminated from GAAP earnings are defined in detail. The setting is different from non‐GAAP earnings disclosures presented in the United States and elsewhere, where managers have discretion over whether to report a non‐GAAP earnings number, and what to exclude from GAAP earnings. Our mandatory setting enables us to report value relevance results that are not confounded by managers' discretionary choices regarding non‐GAAP earnings exclusions. We use price‐level regressions, based on the Ohlson (1995) model, to test for incremental and relative value relevance. The results show that non‐GAAP earnings reported under a mandatory regime have higher value relevance than GAAP earnings. The disaggregation of these items is useful to investors in a setting where managerial motivations are minimized.     

License auctions with royalty contracts for (winners and) losers

This paper revisits the licensing of a non-drastic process innovation by an outside innovator to a Cournot oligopoly. We propose a new mechanism that combines a restrictive license auction with royalty licensing. This mechanism is more profitable than standard license auctions, auctioning royalty contracts, fixed-fee licensing, pure royalty licensing, and two-part tariffs. The key features are that royalty contracts are auctioned and that losers of the auction are granted the option to sign a royalty contract. Remarkably, combining royalties for winners and losers of the auction makes the integer constraint concerning the number of licenses irrelevant.     

Outsourcing via reverse auction with a built-in menu of change orders

Many firms invent and design products while outsourcing their production to independent contractors. We consider a dominant strategy mechanism that selects a contractor using a reverse auction, combined with a menu of permitted change orders from which the contractor can choose after updated cost information has become available. That mechanism maximizes the gain from trade, allows the firm to extract the second highest surplus, and induces the contractor to make efficient adjustments to output after updated cost information has emerged.