We compare two mechanisms through which a potential entrant can take over an incumbent in a market with asymmetric firms: auctions (where other incumbents can bid for the target) and bilateral negotiations between the entrant and the target. The entrant’s choice of target depends on the...

I analyze sequential auctions with expectations-based loss-averse bidders who have independent private values and unit demand. Equilibrium bids are history dependent and subject to a “discouragement effect”: the higher is the winning bid in the current round, the less aggressive are the bids...