The Effect of a Right-of-First-Refusal Clause in a First-Price Auction with Heterogeneous Risk-Averse Bidders

2020 ◽  
Vol 176 (3) ◽  
pp. 526
Author(s):  
Karine Brisset ◽  
François Cochard ◽  
François Maréchal
Keyword(s):  
Risk Averse ◽  
Price Auction ◽  
Right Of First Refusal

Why the Reserve Price Should Not Be Kept Secret

2006 ◽  
Vol 6 (1) ◽  
Author(s):  
Karine Brisset ◽  
Florence Naegelen
Keyword(s):  
Price Policy ◽  
Risk Averse ◽  
Relative Risk Aversion ◽  
Reserve Price ◽  
Bayesian Equilibrium ◽  
Ascending Auctions ◽  
Price Auction ◽  
Second Price Auction ◽  
Optimal Reserve ◽  
Secret Reserve Price

This paper considers the optimality of setting a secret reserve price in ascending auctions. Contrary to intuition, an ascending auction is no longer equivalent to a second price auction when the reserve price is secret. We determine the seller's optimal reserve price policy when the bidders' values are private and independently distributed and when the bidders are risk averse. We show that an optimal secret reserve price policy can dominate an optimal public reserve price policy when the bidders' degree of constant relative risk aversion is sufficiently high and when the seller can commit to a reserve price policy before learning her type. In contrast, a secret reserve price policy can never be part of a Bayesian equilibrium when the seller is informed.

Leveling the Playing Field for Risk-Averse Agents in Security-Bid Auctions

2021 ◽  
Author(s):  
Andrés Fioriti ◽  
Allan Hernandez-Chanto
Keyword(s):  
Allocative Efficiency ◽  
Technical Condition ◽  
Risk Averse ◽  
Security Design ◽  
Call Option ◽  
Equilibrium Behavior ◽  
Playing Field ◽  
Price Auction ◽  
Auction Format ◽  
The Relationship

We introduce risk-averse bidders in a security-bid auction to analyze how the security design affects bidders’ equilibrium behavior and, as a result, the revenue and efficiency of the auction. We show that steeper securities provide more insurance because they allow bidders to smooth payoffs across realizations. Such insurance levels the playing field for more-risk-averse bidders, inducing them to bid more aggressively. As a consequence, the auction’s allocative efficiency weakly increases when the seller switches from a flatter to a steeper security. Furthermore, we prove that when bidders are homogeneously and sufficiently risk averse, the only security that guarantees Pareto efficiency is the steepest, that is, a call option. We also determine the relationship between the security design and the auction format. In particular, we show that for convex and superconvex families of securities, the first-price auction yields higher expected revenues, provided a technical condition, whereas for subconvex families, the second price yields higher expected revenues, provided that bidders are moderately risk averse. Finally, we show that steeper securities also attract higher entry from an ex ante perspective, when entry is costly, and discuss the effects that the presence of risk aversion has on informal auctions. This paper was accepted by Gustavo Manso, finance.

GAME THEORETICAL ANALYSIS OF BUY-IT-NOW PRICE AUCTIONS

2006 ◽  
Vol 05 (03) ◽  
pp. 557-581 ◽  
Author(s):  
HAI YU ◽  
CHUANGYIN DANG ◽  
SHOU-YANG WANG
Keyword(s):  
Necessary Conditions ◽  
Stackelberg Game ◽  
Common Knowledge ◽  
Risk Averse ◽  
Threshold Strategy ◽  
Price Auction ◽  
Participation Costs ◽  
Expected Revenue ◽  
Starting Price ◽  
Distribution Assumption

We study two kinds of buy-it-now options, temporary and permanent, under a theoretical model of Stackelberg game. In this two-stage game, the bidders, as the followers, use a two-threshold strategy to determine whether to bid or directly buy the item at the posted price, given an auction configuration featured by the seller in the first stage and other common knowledge. Under the uniform distribution assumption for the bidders' valuation, we derive the optimal necessary conditions of the starting price and the buy-it-now price for maximizing the seller's expected revenue. Then, we use two numerical experiments to find some interesting insights, which include that under identical bidders' participation costs, the temporary buy-it-now option can acquire a higher expected revenue for the seller than the permanent option, and a buy-it-now price auction always nontrivially dominates a regular auction in terms of the achieved expected revenue, no matter whether the seller or the bidders are risk-averse.

Life after Heart Transplantation

2002 ◽  
Vol 7 (4) ◽  
pp. 285-294 ◽  
Author(s):  
Lucia Savadori ◽  
Lorella Lotto ◽  
Rino Rumiati
Keyword(s):  
Heart Transplantation ◽  
Frame Of Reference ◽  
Physician Communication ◽  
Risk Averse ◽  
Medical Team ◽  
Perceived Knowledge ◽  
Surgical Technology ◽  
Postoperative Therapy ◽  
Life Expectation ◽  
Risk Judgments

Progress in surgical technology and in postoperative therapy has remarkably increased life expectation after heart transplantation. Nevertheless, patients still show a resistance to resume a normal life after transplantation, for example, to return to work. In this study we assume that after surgery patients become risk averse because they achieve a positive frame of reference. Because of this propensity toward risk aversion, they withhold from engaging in behavior that their physical condition would allow them in principle. Coherent with this assumption we found that compared to the medical team patients overestimate the degree of risk for routine activities. The study also showed that the representation of risk by the patients could be captured by a dreadfulness factor and a voluntariness factor. Patients' risk judgments were strongly and specifically predicted by the perceived degree of dreadfulness of the activity and, to a lesser extent, by the perceived knowledge of the consequences. Implications for patient-physician communication were explored.

Risk Attitude and Corporate Investment under Output Market Uncertainty: Evidence from The Mekong River Delta, Vietnam

2016 ◽  
pp. 59-70
Author(s):  
Ninh Le Khuong ◽  
Nghiem Le Tan ◽  
Tho Huynh Huu
Keyword(s):  
Negative Relationship ◽  
Risk Attitude ◽  
Business Strategies ◽  
Risk Averse ◽  
Market Uncertainty ◽  
Firm Investment ◽  
Output Market ◽  
The Impact ◽  
The Relationship

This paper aims to detect the impact of firm managers’ risk attitude on the relationship between the degree of output market uncertainty and firm investment. The findings show that there is a negative relationship between these two aspects for risk-averse managers while there is a positive relationship for risk-loving ones, since they have different utility functions. Based on the findings, this paper proposes recommendations for firm managers to take into account when making investment decisions and long-term business strategies as well.

ON CONSTRUCT OF THE RIGHT OF PRE-EMPTION IN RESPECT OF PARTICIPATORY INTEREST (SHARES)

2020 ◽  
Vol 20 (4) ◽  
pp. 94-219
Author(s):  
I.S. CHUPRUNOV
Keyword(s):  
General Rule ◽  
Constitutive Theory ◽  
Freedom Of Contract ◽  
Legal Nature ◽  
Public Corporation ◽  
Russian Law ◽  
Right Of First Refusal ◽  
The Right

The paper provides analysis of the legal nature and the mechanism for exercise of the right of pre-emption (right of first refusal) in respect of execution of a contract taking as an example of right of first refusal to purchase a stake in a non-public corporation, and also examines the boundaries of parties’ autonomy and freedom of contract in this area. The author comes to the conclusion that the key elements of the construction of the right of pre-emption are the transformation powers that belong to the right holder. The author also demonstrates that, notwithstanding their dominance in Russian law, the views, which suggest that exercise of the right of pre-emption leads to “transfer of rights and obligations of a purchaser” (the translative theory), should be rejected. These views must be replaced with the constitutive theory, according to which exercise of the right of pre-emption results in a new contract between the right holder and the seller (as a general rule, on the same terms that were agreed between the seller and the purchaser).

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