This paper presents a model of corporate takeovers in a framework of auctions with multidimensional signals. The model considers a target firm whose value for each bidder is composed of both common and private values. A key novel feature of our model is that bidders privately observe a noisy signal that is positively but imperfectly correlated with the common value. Absent a noisy signal, which is true in most extant studies of common value auctions, bidders would be informed of a common value factor that is independent of each other. A symmetric equilibrium is developed where inefficient takeovers may take place because information regarding common value cannot be aggregated. Furthermore, we show that there is a non-monotonic relationship between the probability of inefficient takeovers and the precision of information.
Keywords: common value auction; multidimensional signals; takeover contests; inefficient allocation; corporate takeovers
학회소식
학회소식
[2011년 제 2차] Inefficient Corporate Takeovers under Multidimensio
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게시일 :
2011-06-03