Auctions with Endogenous Initiation |
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Authors: | ALEXANDER S GORBENKO ANDREY MALENKO |
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Institution: | 1. Correspondence: Alexander S. Gorbenko, Department of Economics and School of Management, University College London, London, UK;2. email: a.gorbenko@ucl.ac.uk. |
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Abstract: | We study initiation of takeover auctions by potential buyers and the seller. A bidder's indication of interest reveals that she is optimistic about the target. If bidders' values have a substantial common component, as in takeover battles between financial bidders, this effect disincentivizes bidders from indicating interest, and auctions are seller-initiated. Conversely, in private-value auctions, such as battles between strategic bidders, equilibria can feature both seller- and bidder-initiated auctions, with the likelihood of the latter decreasing in commonality of values and the probability of a forced sale by the seller. We also relate initiation to bids and auction outcomes. |
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