Timing of Auctions of Real Options
Abstract
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...
Paper Details
Title
Timing of Auctions of Real Options
Published Date
Sep 1, 2020
Journal
Volume
66
Issue
9
Pages
3956 - 3976
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