Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273040 
Year of Publication: 
2022
Series/Report no.: 
Center for Mathematical Economics Working Papers No. 664
Publisher: 
Bielefeld University, Center for Mathematical Economics (IMW), Bielefeld
Abstract: 
The allocation of a co-owned company to a single owner using the Texas Shoot-Out mechanism with private valuations is investigated. We identify Knightian Uncertainty about the peer's distribution as the reason for its deterrent effect of an immature dissolving. Modeling uncertainty by a compact environment around a reference distribution F in the Prohorov metric, we derive the optimal price announcement for an ambiguity averse divider. The divider hedges against uncertainty for valuations close to the median of F, while extracting expected surplus for high and low valuations. The outcome of the mechanism is efficient for valuations around the median. A risk neutral co-owner prefers to be the chooser, even strictly so for any valuation under low levels of uncertainty and for extreme valuations under high levels of uncertainty.
Subjects: 
Knightian Uncertainty in Games
Texas Shout-Out
Partnership Dissolution
JEL: 
C72
D74
D81
D82
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Working Paper

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