Search results

Published reviews of the extensive body of research into mergers and acquisitions have generally concluded that shareholders as a body are not adversely affected by acquisition activity. For example Jensen and Ruback (1983) conclude that ‘corporate takeovers generate positive gains, that target firm shareholders benefit, and that bidding firm shareholders do not lose’. In a review of more recent research, however, Jarrell, Brickley and Netter (1988) conclude that acquirers ‘receive at best modest increases in their stock price, and the winners of bidding contests suffer stock‐price declines as often as they do gains’.

To transform donations “in kind” into cash, charities of all sizes use auctions and raffles. Despite this, neither the theory nor the practice of efficient fund-raising – and, in particular, charity auctions – has received sufficient attention from economists, especially the fact that participation in fund-raisers is endogenous. We describe, in detail, the design and implementation of an experiment to examine 15 charity auction mechanisms. While some of the mechanisms have already received attention from both theorists and empiricists, ours is the first comprehensive examination of all existing mechanisms and the first to explore the potential of a few new formats. Our analysis focuses on participation differences among the formats and how theory and supplemental survey data can help explain some of these differences.

We compare allocation rules in uniform price divisible-good auctions. Theoretically, a “standard allocation rule (STANDARD)” and a “uniform allocation rule (UNIFORM)” admit different types of low-price equilibria, which are eliminated by a “hybrid allocation rule (HYBRID).” We use a controlled laboratory experiment to compare the empirical performances of these allocation rules.

We conduct three-bidder uniform price divisible-good auctions varying the different allocation rules (standard, uniform, or hybrid) and whether or not explicit communication between bidders is allowed. For the case where explicit communication is allowed we also study six-bidder auctions.

We find that prices are similar across allocation rules. Under all three allocation rules, prices are competitive when bidders cannot explicitly communicate. With explicit communication, prices are collusive, and we observe collusive prices even when collusive agreements are broken. Collusive agreements are particularly fragile when the gain from a unilateral deviation is larger, and an implication of this is that collusive agreements are more robust under STANDARD.

We do not find conclusive evidence of differences in performance among allocation rules. However, there is suggestive evidence that STANDARD may be more vulnerable to collusion.

Divisible-good uniform price auctions are used in financial markets, but it is not possible to use naturally occurring data to test how alternatives to the standard format would perform. Using laboratory methods we provide an initial test of alternative allocation rules.

Though cross-border acquisitions have grown dramatically in value and frequency in the last ten years, little is known about returns to acquirers or their method-of-payment choice. This paper studies returns to U.S. bidders and their method-of-payment choice for acquisitions of foreign targets. Results indicate that bidder returns are higher for cash offers, for offers to private and subsidiary targets, if there is high insider ownership, and if there is high exchange rate variation. The method-of-payment choice for these bidders is linked to the target country’s legal regime and accounting standards, insider ownership, target type, and value uncertainty.

Livingston (2002) shows that bidders in Internet auctions are easily convinced of a seller’s trustworthiness: they bid large amounts even if sellers have barely established a reputation for performance, suggesting that they believe that typical sellers usually perform. This study reinforces this conclusion by looking at how bidders choose which auction to bid in when there are several that are selling the same item. The analysis shows that so long as a seller has some history, bidders consider bidding in the seller’s auction. They then choose auctions that offer the best chance to obtain the good at the lowest price.

Traditional auction theory assumes that bidders possess values defined solely on the auctioned object. There may, however, be cases in which bidders possess preferences over the revenue achieved by the auctioneer. We present here a comprehensive framework of price-preference valuations, unifying several phenomena ranging from preference for charitable giving to shill bidding. We compare expected efficiency and revenue of first- and second-price auctions for some specific cases of key interest. We also incorporate heterogeneous bidder preferences and examine the effects of mis-specified beliefs and show that both are crucial for understanding these situations.

We examine bidder returns in Japanese mergers and find that shareholders of bidders experience a significant positive announcement return. Bidder returns are higher when firms acquire targets in the same industry, when their managers performed well before the merger, and when their managers acquire relatively large targets. Unlike non-keiretsu firms, returns to keiretsu firms are higher when they acquire firms operating in different industries. We also find that bidder returns increase with the bidder’s leverage and the bidder’s ties to financial institutions through borrowings. Our evidence is consistent with the view that managerial incentives affect firm value.

In many countries that allow unsolicited proposals (USPs) for public–private partnership (PPP) projects, incentives are awarded to the initial proponent of the USP projects during the tendering process as rewards for initially making a proposal. Because of such a reward system, including the bonus system, USPs are commonly known to involve fewer tender participants. This paper aims to investigate the empirical relationship between the number of tender participants and the institutional factors of PPPs. Specifically, two institutional factors are examined: the use of USPs and the bonus system for initial USP proponents.

The ordinary least squares (OLS) and Poisson regression analysis is used in this study to analyze PPP data in South Korea.

This paper demonstrated that USP projects have fewer bidders participating in tenders than solicited projects. Meanwhile, the analysis showed that the bonus system as another component of the institutional framework did not account for the number of bidders in tendering. In the analysis by three different facility types (“Roads,” “Environmental facilities” and “Other” types) of whether the bonus system discouraged participation in the bidding, the authors found heterogeneous responses among the types. For “Roads” and “Other” types of projects, the existence of the bonus system reduced the number of bidders for USP projects, while for “Environmental facilities,” there was no negative relationship between bonus points and the number of bidders. In the analysis of whether there were fewer bidders when no bonus points were awarded, there was no statistically significant difference in the number of bidders for “Roads” and “Environmental facilities.”

This study shows the possibility that other institutional factors apart from bonus points affect competition. The characteristic factors of USPs can affect the decision to participate in the tender from the perspective of potential bidders.

Recent studies on USPs have mainly focused on the strategies that ensure the effective management of USPs for PPP implementation. However, quantitative effects of USPs on the tendering process have not yet been addressed. The quantitative effect refers to something that may be estimated by quantity or that relates to the describing or measuring of quantity, such as the present attempt to account for the number of bidders.

This paper gives a model of collusion formation and a method of measuring the degree of it among the traders/bidders in the agricultural commodity markets in India. The important assumption is that the bidding is repetitive with a set of common bidders. The theory has been derived based on the behavior of the wholesale market of agricultural commodities in India. The paper is based on full information in the collusion formation. The paper first derives the theoretical structure of the bidders' behavior and thereafter derives a measure of collusion formation with the help of real-life data.

The paper used the standard theory of optimization and the theory of auction and probability statistics.

This is a complete information model of cartel formation. The bidding is repetitive and continues forever in discrete time. Hence bidders behavior is observable. Using the proposed method, if the APMC measures for each market and publishes on a periodic basis, say weekly basis, then it will be easier to break the collusion in the market where relative collision is present. For example, if a farmer has three options to sell in three different markets, then the published data would help them to select the market where the degree of collusion is relatively lower. Moreover, the undesirable loss can be avoided based on the right choice of market. As a result, transaction costs will be optima.

The paper first derives the theoretical structure of the bidders' behavior and thereafter derives a measure of collusion formation with the help of real-life data.

The endowment effect is arguably one of the most robust phenomena documented in economics, behavioral decision theory and consumer research. However, the endowment effect has traditionally been studied as a fairly static phenomenon at the transactional level of analysis.

This paper documents this “contagious” endowment effect using lab experiments and such field data as eBay transactions and discuss the managerial implication of these findings.

This study suggests that the endowment effect is not limited to the level of the specific object, but can manifest itself with the more abstract class of objects to which a specific object happens to belong.

A logical next step would be to examine the boundary conditions – how similar does the subsequent object have to be for the endowment effect to transfer over to it? A related aspect would be whether there are boundary conditions arising from the quality of the endowment.

The effects reported here probably underlie the success of the many types of “bait and switch” schemes that have been used by the more unsavory type of marketer. As such, these findings might have implications for policy in the area of consumer protection.

This paper argues for and presents evidence consistent with the notion that the endowment effect is dynamic and can be transferred from one transaction to another and refer to this generalization of the endowment effect to other, similar products as “contagious endowment.”