On the Optimal Package Format for Asset Sellers
The International Journal of Business and Finance Research, Vol. 3, No. 1, pp. 59-67, 2009
9 Pages Posted: 27 Feb 2010
Date Written: 2009
A seller who owns two common-value assets can choose to either sell them as a bundle or separately. In this paper, we present a theoretical model to select the optimal selling option when there is asymmetric information between the seller and the buyers. Our main finding is that separate selling makes the seller fall into a bilateral monopoly environment, in which the assets are sold through bargaining, while bundled selling leads to a competitive bidding environment. When the seller’s bargaining ability is given, the difference between the two assets’ values increases, so the seller’s incentive to sell as a bundle decreases. On the other hand, given the values of both assets, when the seller’s bargaining power increases, the incentive to sell as a bundle decreases.
JEL Classification: D44, D82
Suggested Citation: Suggested Citation