Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108798
Authors: 
Koska, Onur A.
Onur, Ilke
Stähler, Frank
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5256
Abstract: 
We scrutinize the scope of auctions in the presence of downstream interactions and information externalities by using the topical example of a firm acquisition. 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.
Subjects: 
takeover
auction
externality
incomplete information
commitment
JEL: 
D44
D82
Document Type: 
Working Paper

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