TY  - JOUR
AU  - Bulow,Jeremy
AU  - Klemperer,Paul
TI  - Auctions vs. Negotiations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4608
PY  - 1994
Y2  - January 1994
UR  - http://www.nber.org/papers/w4608
L1  - http://www.nber.org/papers/w4608.pdf
N1  - Author contact info:
Jeremy I. Bulow
Stanford University
Graduate School of Business
Stanford, CA  94305-7298
Tel: 650/723-2160
Fax: 650/725-8916
E-Mail: jbulow@stanford.edu

Paul D. Klemperer
Nuffield College
Oxford University
Oxford OX1 1NF
England
E-Mail: paul.klemperer@economics.ox.ac.uk
AB  - Which is the more profitable way to sell a company: a public auction or an optimally structured negotiation with a smaller number of bidders?  We show that under standard assumptions the public auction is always preferable, even if it forfeits all the seller's negotiating power, including the ability to withdraw the object from sale, provided that it attracts at least one extra bidder.  An immediate public auction also dominates negotiating while maintaining the right to hold an auction subsequently with more bidders.  The results hold for both the standard independent private values model and a common values model.  They suggest that the value of negotiating skill is small relative to the value of additional competition.
ER  -