To Auction or to Negotiate
نویسنده
چکیده
What procedure should a monopolist selling a single object adopt in order to maximize revenue? In settings where potential buyers may derive beneficial externalities from the sale of the object to any one of them, we show that a simple take-it-or-leave-it exclusively to one buyer generates greatest revenue among all “standard selling procedures” a class of selling procedures that include all typical auctions. In this sense, negotiations dominate auctions! We discuss the implications of this result for corporate takeover battles and private provision of public goods. An important corollary of our work is the the surprising conclusion that a bidder cartel can actually increase the seller’s revenue. (JEL C7, D8, G34)
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