A Theory of Costly Sequential Bidding (Presentation Slides)
Forthcoming, Review of Finance, March 2018
34 Pages Posted: 31 May 2018 Last revised: 29 Jul 2018
Date Written: June 29, 2018
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.
Prepublication version available at https://ssrn.com/abstract=161013.
Keywords: sequential bidding, auctions, takeover bidding, revenue equivalence
JEL Classification: G34, D44
Suggested Citation: Suggested Citation