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A “matching auction” for targets with heterogeneous bidders

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A “matching auction” for targets with heterogeneous bidders. / Dasgupta, Sudipto; Tsui, Kevin.

In: Journal of Financial Intermediation, Vol. 12, No. 4, 10.2003, p. 331-364.

Research output: Contribution to journalJournal article

Harvard

Dasgupta, S & Tsui, K 2003, 'A “matching auction” for targets with heterogeneous bidders', Journal of Financial Intermediation, vol. 12, no. 4, pp. 331-364. https://doi.org/10.1016/j.jfi.2003.08.003

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Dasgupta, Sudipto ; Tsui, Kevin. / A “matching auction” for targets with heterogeneous bidders. In: Journal of Financial Intermediation. 2003 ; Vol. 12, No. 4. pp. 331-364.

Bibtex

@article{96224dad0e4e43dba6e8ef69dde8713f,
title = "A “matching auction” for targets with heterogeneous bidders",
abstract = "When potential bidders for a target firm are heterogeneous, standard auction methods for selling the firm are not optimal, as they treat the bidders symmetrically. In a two-bidder contest, one way to discriminate against the stronger bidder is to impose an order of moves. A simple “matching auction” can achieve this objective, in which the “strong” bidder is asked to make a first and final offer, and the other bidder is asked to match this bid. We consider two sources of bidder heterogeneity in a common-value setting: differences in initial toeholds, and asymmetric effects of the bidders' private signals on value. The matching auction results in a higher expected selling price than the standard auctions when the asymmetry is sufficiently large. Other properties of the matching auction are discussed.",
keywords = "Takeovers, Auctions, Bidding, Targets, Toeholds",
author = "Sudipto Dasgupta and Kevin Tsui",
year = "2003",
month = oct,
doi = "10.1016/j.jfi.2003.08.003",
language = "English",
volume = "12",
pages = "331--364",
journal = "Journal of Financial Intermediation",
issn = "1042-9573",
publisher = "Academic Press Inc.",
number = "4",

}

RIS

TY - JOUR

T1 - A “matching auction” for targets with heterogeneous bidders

AU - Dasgupta, Sudipto

AU - Tsui, Kevin

PY - 2003/10

Y1 - 2003/10

N2 - When potential bidders for a target firm are heterogeneous, standard auction methods for selling the firm are not optimal, as they treat the bidders symmetrically. In a two-bidder contest, one way to discriminate against the stronger bidder is to impose an order of moves. A simple “matching auction” can achieve this objective, in which the “strong” bidder is asked to make a first and final offer, and the other bidder is asked to match this bid. We consider two sources of bidder heterogeneity in a common-value setting: differences in initial toeholds, and asymmetric effects of the bidders' private signals on value. The matching auction results in a higher expected selling price than the standard auctions when the asymmetry is sufficiently large. Other properties of the matching auction are discussed.

AB - When potential bidders for a target firm are heterogeneous, standard auction methods for selling the firm are not optimal, as they treat the bidders symmetrically. In a two-bidder contest, one way to discriminate against the stronger bidder is to impose an order of moves. A simple “matching auction” can achieve this objective, in which the “strong” bidder is asked to make a first and final offer, and the other bidder is asked to match this bid. We consider two sources of bidder heterogeneity in a common-value setting: differences in initial toeholds, and asymmetric effects of the bidders' private signals on value. The matching auction results in a higher expected selling price than the standard auctions when the asymmetry is sufficiently large. Other properties of the matching auction are discussed.

KW - Takeovers

KW - Auctions

KW - Bidding

KW - Targets

KW - Toeholds

U2 - 10.1016/j.jfi.2003.08.003

DO - 10.1016/j.jfi.2003.08.003

M3 - Journal article

VL - 12

SP - 331

EP - 364

JO - Journal of Financial Intermediation

JF - Journal of Financial Intermediation

SN - 1042-9573

IS - 4

ER -