Auctions versus Negotiations

Which is the more profitable way to sell a company: an auction with no reserve price or an optimally structured negotiation with one less bidder? The authors show, under reasonable assumptions, that the auction is always preferable when bidders' signals are independent. For affiliated signals, the result holds under certain restrictions on the seller's choice of negotiating mechanism. The result suggests that the value of negotiating skill is small relative to the value of additional competition. The paper also shows how the analogies between monopoly theory and auction theory can help derive new results in auction theory. Copyright 1996 by American Economic Association.

[1]  Cases and materials on corporations , 1953 .

[2]  Sanford J. Grossman,et al.  The free-rider problem and the theory of the corporation , 1980 .

[3]  Roger B. Myerson,et al.  Optimal Auction Design , 1981, Math. Oper. Res..

[4]  Paul R. Milgrom,et al.  A theory of auctions and competitive bidding , 1982 .

[5]  Peter Cramton,et al.  Sequential Bargaining Mechanisms , 1985 .

[6]  Richard P. McLean,et al.  Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent , 1985 .

[7]  Robert W. Vishny,et al.  Greenmail, White Knights, and Shareholders' Interest , 1986 .

[8]  R. McAfee,et al.  Auctions and Bidding , 1986 .

[9]  R. McAfee,et al.  Auctions with entry , 1987 .

[10]  Artur Raviv,et al.  Corporate control contests and capital structure , 1988 .

[11]  Andrei Shleifer,et al.  Value Maximization and the Acquisition Process , 1988 .

[12]  Jeremy I. Bulow,et al.  The Simple Economics of Optimal Auctions , 1989, Journal of Political Economy.

[13]  Ivan P. L. Png,et al.  Facilitation of Competing Bids and the Price of a Takeover Target , 1989 .

[14]  R. McAfee,et al.  Extracting the Surplus in the Common-Value Auction , 1989 .

[15]  Barry Nalebuff,et al.  To The Raider Goes The Surplus? A Reexaminationof the Free‐Rider Problem , 1992 .

[16]  P. Reny,et al.  Correlated Information and Mechanism Design , 1992 .

[17]  R. Preston McAfee,et al.  Updating the Reserve Price in Common Value Auctions , 1992 .

[18]  Ruqu Wang.  Auctions versus Posted-Price Selling , 1993 .

[19]  Henricus Emerence David Houba.  Game theoretic models of bargaining , 1994 .

[20]  N. M. Fehr,et al.  PREDATORY BIDDING IN SEQUENTIAL AUCTIONS , 1994 .

[21]  J. Morgan,et al.  An Analysis of the War of Attrition and the All-Pay Auction , 1997 .

[22]  Common value auctions with independent types , 1996 .

[23]  C. Avery,et al.  Strategic Jump Bidding in English Auctions , 1998 .