A Theory of Costly Sequential Bidding
41 Pages Posted: 17 Aug 1999 Last revised: 25 Feb 2019
Date Written: July 30, 1998
We propose a model of sequential bidding for a valuable object, such as a takeover target, when it is costly submit or revise a bid. An implication of the model is that bidding occurs in repeated jumps, a pattern that is consistent with certain types of natural auctions such as takeover contests. The jumps in bid communicate bidders' information rapidly, leading to contests that are completed with a small number of bids. The model provides several new results concerning revenue and efficiency relationships between different auctions, and provides an information-based interpretation of delays in bidding.
Presentation slides available at: https://ssrn.com/abstract=3181599.
Keywords: takeovers, auctions, sequential bidding, revenue equivalence
JEL Classification: D81, D82
Suggested Citation: Suggested Citation