Timing of Auctions of Real Options

• 成果类型: Article
• 署名作者: Cong, Lin William
• 署名单位: Cornell University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2019.3374
• 发表日期: 2020
• 页码: 3956-3976
• 关键词: auction initiation; Dynamic game; irreversibility; mechanism design; Mergers and Acquisitions; optimal stopping

摘要

This paper endogenizes auction timing and initiation in auctions of real options. Because bidders have information rent, a seller faces a virtual strike price higher than the actual exercise cost. The seller inefficiently delays the auction to encourage bidder participation and uses the irreversible nature of time to gain partial control over option exercises. The seller's private benefit at option exercise may restore efficient auction timing, but option exercises are always inefficiently late. When the seller lacks commitment to auction timing, bidders always initiate in equilibrium, resulting in earlier option exercise and higher welfare than auctions proscribing bidder initiation. Overall, auction timing modifies the distribution of the bidder valuations and has important implications for bidding strategies, auction design, and real outcomes.