Silent Interests and All-Pay Auctions
30 Pages Posted: 18 May 2005
Date Written: May 2005
Abstract
If firms compete in all-pay auctions with complete information, silent shareholdings introduce asymmetric externalities into the all-pay auction framework. If the strongest firm owns a large share in the second strongest firm, this may make the strongest firm abstain from bidding. As a consequence, equilibrium profits of both firms may increase, but the prize may be allocated less efficiently. The reverse ownership structure is also likely to increase the profits of the firms involved in the ownership relationship but without these negative efficiency effects.
Keywords: All-pay auctions, externalities, contests, silent minority shareholdings, ownership structure
JEL Classification: D44, L11, L41
Suggested Citation: Suggested Citation
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