UCL Department of Economics


Finance seminar presented by Andrey Malenko (Boston College)

09 October 2019, 4:00 pm–6:00 pm

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Auctions with Endogenous Initiation

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Ji Hee Yoon

We study strategic initiation of auctions by potential buyers and the seller. This problem arises in auctions of companies and asset sales, among other contexts. A bidder's decision to approach the seller signals that this bidder is optimistic about the value of the asset. In common-value auctions, such as battles between nancial bidders, this revelation eect disincentivizes bidders from approaching the seller. In pure common-value auctions, no bidder ever approaches and auctions are seller-initiated. By contrast, in private-value auctions, such as battles between strategic bidders, the effect is the opposite, and equilibria can feature both seller- and bidder-initiated auctions.
The model generates testable implications about the link between the initiating party, bids, and sale outcomes. It also points to a role of shareholder activists and investment banks as intermediaries in auctions of companies.

Paper can be found

About the Speaker

Ralph Koijen

at Chicago Booth