We develop a two-sided asymmetric information model of asset sales that incorporates the key differences from mergers and allows the information held by each party to be impounded in the transaction. Buyer information is conveyed through a first-stage competitive auction. A seller with...

This study examines the emergence of the Bulgarian stock market and the role of controlling blockholders. A new approach using mass privatization auction data measures the premium for control and demonstrates that, in the absence of legal constraints, majority owners extract more than 85% of...

This paper characterizes how a target firm should be sold when raiders have prior stakes in its ownership (toeholds). We find that the optimal mechanism needs to be implemented by a non-standard auction which imposes a bias against buyers with high toeholds. This discriminatory procedure is so...

We compare the two most common bidding processes for selling a company or other asset when participation is costly to buyers. In an auction all entry decisions are made prior to any bidding. In a sequential bidding process earlier entrants can make bids before later entrants choose whether to...

We run experiments on English Auctions where the bidders already own a part (toehold) of the good for sale. The theory predicts a very strong effect of even small toeholds, however we find the effects are not so strong in the lab. We explain this by analyzing the flatness of the payoff...

In this paper, we empirically identify rational overbidding using evidence from Hong Kong land auctions. In particular, we test for rational overbidding through a toehold effect in bidding behavior (Burkart (1995), Bulow, Huang and Klemperer, (1999)). In Hong Kong, auctions are widely used by...

This paper demonstrates that winning a takeover bidding contest can be `bad news' and, consequently, losing can be `good news.' This result is true even when all bidders are acting rationally in their own best interests and have perfect information on their valuations. Bidders with toeholds...

We study simultaneous security-bid second-price auctions with competition among sellers for potential bidders. The sellers compete by designing ordered sets of securities that the bidders can offer as payment for the assets. Upon observing auction designs, potential bidders decide which auctions...

In a private values, open auction, we show that bidder surplus can be expressed as a simple difference between unconditional moments of order statistics. The strength of the result is its simplicity and generality, as we dispense with the typical assumptions of independence and/or symmetry. We...

We study strategic initiation of auctions by potential buyers and the seller. This problem arises in auctions of companies and asset sales, among other contexts. The bidder's decision to approach the seller reveals that her valuation is sufficiently high. In common-value auctions, such as...