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A Theory of Preemptive Takeover Bidding
Michael J. Fishman
The RAND Journal of Economics
Vol. 19, No. 1 (Spring, 1988), pp. 88-101
Stable URL: http://www.jstor.org/stable/2555399
Page Count: 14
You can always find the topics here!Topics: Bidding, Tender offers, Modeling, Prices, Economic theory, Signals, Average prices, Real estate auctions, Acquisition costs, Economic models
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This article develops a model of the takeover bidding process. The model can be described as a form of auction in which a bidder can acquire costly information after the bidding has begun. Implications concerning the interrelationships between bidders' and targets' profits, bidders' initial offers, single and multiple bidder contests, and the effects of takeover legislation are developed. Additionally, the model provides a rationale for bidders to make high premium ("preemptive") initial bids, rather than making low initial bids and raising them if there is competition.
The RAND Journal of Economics © 1988 RAND Corporation