A Theory of Costly Sequential Bidding

41 Pages Posted: 17 Aug 1999 Last revised: 25 Feb 2019

See all articles by Kent D. Daniel

Kent D. Daniel

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; NBER

Date Written: July 30, 1998

Abstract

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

Daniel, Kent D. and Hirshleifer, David A., A Theory of Costly Sequential Bidding (July 30, 1998). Ross School of Business Paper No. 98028. Available at SSRN: https://ssrn.com/abstract=161013 or http://dx.doi.org/10.2139/ssrn.161013

Kent D. Daniel (Contact Author)

Columbia Business School - Finance and Economics ( email )

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212-854-4679 (Fax)

HOME PAGE: http://kentdaniel.net/

National Bureau of Economic Research (NBER)

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David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States

HOME PAGE: http://sites.uci.edu/dhirshle/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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