A Theory of Indicative Bidding

@inproceedings{Quint2018ATO,
  title={A Theory of Indicative Bidding},
  author={Daniel Quint and Kenneth Hendricks},
  year={2018}
}
When selling a business by auction, sellers typically use indicative bids—nonbinding preliminary bids—to select a small number of bidders to conduct due diligence and submit binding offers. We show that if entry into the auction is costly, indicative bids can be informative: symmetric equilibrium exists in weakly increasing strategies, with bidders “pooling” over a finite number of bids. The equilibrium helps the seller select high value bidders with higher likelihood, although the highest… CONTINUE READING

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