Citation

Discussion Paper Details

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Full Details

Title: Almost Common Value Auctions: The 'Wallet Game' and its Applications to Takeover Battles and Airwaves Auctions

Author(s): Paul Klemperer

Publication Date: August 1997

Keyword(s): Airwaves Auction, Auction Theory, Common Values, Corporate Acquisitions, Mergers, PCS Auction, Spectrum Auction, Takeovers and Winner's Curse

Programme Area(s): Financial Economics and Industrial Organization

Abstract: We use a classroom game, the ?Wallet Game?, to show that in standard ascending, i.e. English, auctions of close-to-common-values objects, even slight asymmetries between bidders can have very large effects on prices. Examples of small asymmetries are a small value advantage for one bidder or a small ownership of the object by one bidder; the effects of these asymmetries are greatly exacerbated by entry costs or bidding costs. We discuss applications to airwaves auctions and takeover battles including the Glaxo-Wellcome merger.

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Bibliographic Reference

Klemperer, P. 1997. 'Almost Common Value Auctions: The 'Wallet Game' and its Applications to Takeover Battles and Airwaves Auctions'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1682