The University of Southampton
University of Southampton Institutional Repository

The timing of acquisitions

The timing of acquisitions
The timing of acquisitions
We analyse the timing of competitive bids. There are two buyers in our model, each of whom decide when and how much to bid for an object. These agents' valuations are commonly known, but are driven by a stochastic state variable that varies randomly over time. We assume that agent 1 (2) has the higher valuation when the state is high (low). We show first that there is delay in equilibrium: agent 1 bids only when the state is sufficiently high; and agent 2 bids only when the state is sufficiently low. This delay is not necessarily present when there is a single agent; it is present with two agents because competition makes payoffs convex. Secondly, the extent of delay increases with the degree of uncertainty (i.e., both agents wait for more extreme values of the state before bidding). Thirdly, we show that there is too much delay in equilibrium, relative to the efficient solution. Finally, we show that, in our model, the seller wishes to sell immediately, and to choose the lowest degree of uncertainty about the value of the object.
real options, timing games, auctions, acquisitions
255
Mimeo
Mason, Robin
c989f0e0-de54-495d-aeaf-75b42d62cb61
Weeds, Helen
0f3a0771-efdd-4df5-8f38-aa8e60fc7cd2
Mason, Robin
c989f0e0-de54-495d-aeaf-75b42d62cb61
Weeds, Helen
0f3a0771-efdd-4df5-8f38-aa8e60fc7cd2

Mason, Robin and Weeds, Helen (2005) The timing of acquisitions (Society for Economic Dynamics: 2005 Meeting Papers, 255) New York, USA. Mimeo

Record type: Monograph (Working Paper)

Abstract

We analyse the timing of competitive bids. There are two buyers in our model, each of whom decide when and how much to bid for an object. These agents' valuations are commonly known, but are driven by a stochastic state variable that varies randomly over time. We assume that agent 1 (2) has the higher valuation when the state is high (low). We show first that there is delay in equilibrium: agent 1 bids only when the state is sufficiently high; and agent 2 bids only when the state is sufficiently low. This delay is not necessarily present when there is a single agent; it is present with two agents because competition makes payoffs convex. Secondly, the extent of delay increases with the degree of uncertainty (i.e., both agents wait for more extreme values of the state before bidding). Thirdly, we show that there is too much delay in equilibrium, relative to the efficient solution. Finally, we show that, in our model, the seller wishes to sell immediately, and to choose the lowest degree of uncertainty about the value of the object.

Full text not available from this repository.

More information

Published date: 2005
Additional Information: Presented at Society for Economic Dynamics Annual Meeting, Budapest, 23-25 Jun 2005
Keywords: real options, timing games, auctions, acquisitions

Identifiers

Local EPrints ID: 35023
URI: https://eprints.soton.ac.uk/id/eprint/35023
PURE UUID: 33c6771e-743c-47cf-ad5d-1a2f363dff3d

Catalogue record

Date deposited: 15 May 2006
Last modified: 17 Jul 2017 15:48

Export record

Contributors

Author: Robin Mason
Author: Helen Weeds

University divisions

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of https://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×