The scope of auctions in the presence of downstream interactions and information externalities (2018)
Type of ContentJournal Article
PublisherSpringer Science and Business Media LLC
AuthorsKoska OA, Onur I, Stähler Fshow all
© 2017, Springer-Verlag GmbH Austria, part of Springer Nature. 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.
CitationKoska OA, Onur I, Stähler F (2018). The scope of auctions in the presence of downstream interactions and information externalities. Journal of Economics/ Zeitschrift fur Nationalokonomie. 125(2). 107-136.
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KeywordsTakeover; Auction; Externality; Incomplete information; Commitment
ANZSRC Fields of Research38 - Economics::3801 - Applied economics::380107 - Financial economics
35 - Commerce, management, tourism and services::3502 - Banking, finance and investment::350208 - Investment and risk management