scispace - formally typeset
Search or ask a question

Showing papers on "Bidding published in 1994"


Journal ArticleDOI
TL;DR: In this article, the authors examined the valuation consequences of 276 U.S. international acquisitions made in the period 1975-1988, and provided direct evidence on the effect of international acquisitions on the market value of U. S. bidding firms.
Abstract: Do international acquisitions—in contrast to their domestic counterparts—create value for the acquiring firms' shareholders? This study examines the valuation consequences of 276 U.S. international acquisitions made in the period 1975–1988, and provides direct evidence on the effect of international acquisitions on the market value of U.S. bidding firms. It is shown that, on average, international acquisitions create value for the acquiring firms. The study also finds that the value created is a function of the nature of the acquisition (e.g., related or unrelated); the nature of the bidding firm's industry (e.g., its concentration level and advertising intensity); the nature of the acquiring firm (e.g., its prior international experience and its current profitability); and the nature of the macroeconomic environment (e.g., tax regulations and the relative strength of the U.S. dollar).

354 citations


Journal ArticleDOI
TL;DR: In this paper, a critical analysis of the models available to aid competitive bidding decision making-bidding strategy and auction design-in real transactions is presented, and a general theme of enriched models are needed to bring bidding theory closer to direct applicability in decision making.
Abstract: In analyzing bidding, modeling matters. This paper is a critical analysis of the models available to aid competitive bidding decision making-bidding strategy and auction design-in real transactions. After an introductory overview, this paper describes the contexts in which auctions arise, reviews the "mainstream" theory of single, isolated auctions and discusses the important work involved in enrichment of this theory. In doing so, it indicates results that have been obtained and the sort of changes in analytical approach that are needed to tackle other critical enrichments. The paper summarizes briefly what is known about the direct use of models by bidders and auction designers. A general theme of this paper is that enriched models are needed to bring bidding theory closer to direct applicability in decision making.

328 citations


Journal ArticleDOI
TL;DR: In this paper, the authors model the maintenance of management quality through the simultaneous functioning of internal and external corporate control mechnism, and examine how the information sets of the board and the acquiror are noisily aggregated.

167 citations


Posted Content
TL;DR: In this paper, the average winning bids of risk neutral agents bidding for objects with valuations drawn from independent, identical distributions are lower in later auctions than in earlier auctions, and the authors provide an explanation for the "declining price anomaly" in sequential second price auctions.
Abstract: This note provides an explanation for the 'declining-price anomaly' in sequential second price auctions. We illustrate how the average winning bids of risk neutral agents bidding for objects with valuations drawn from independent, identical distributions are lower in later auctions than in earlier auctions. When the objects are not identical we determine the optimal order in which they should be auctioned.

153 citations


Journal ArticleDOI
TL;DR: In this paper, the authors examined the performance of rotating savings and credit associations (roscas), a financial institution which is observed world-wide, and developed a model in which individuals save for an indivisible good and study roscas which distribute funds using random allocation and bidding.
Abstract: This paper examines the allocative performance of rotating savings and credit associations (roscas), a financial institution which is observed world-wide. We develop a model in which individuals save for an indivisible good and study roscas which distribute funds using random allocation and bidding. The allocations achieved by the two types of rosca are compared with that achieved by a credit market and with efficient allocations more generally. We find that neither type of rosca is efficient and that individuals are better off with a credit market than a bidding rosca. Nonetheless, a random rosca may sometimes yield a higher level of ex ante expected utility to prospective participants than would a credit market. I. INTRODUCTION Rotating savings and credit associations (roscas) are a widely observed institution for financial intermediation. They are found all over the world, particularly in developing countries, and have heretofore received scant attention from economists.' This paper and its companion piece (Besley, Coate and Loury (1993)) constitute a first attempt to analyse their economic role and performance. Roscas come in two main forms. The first type allocates funds randomly. In a random rosca, members commit to putting a fixed sum of money into a "pot" for each period of the rosca's life. Lots are drawn and the pot is randomly allocated to one of the members. In the next period, the process repeats itself, with each previous winner excluded from the draw. The process continues until each rosca member has received the pot once. At this point, the rosca is either disbanded or begins over again. Individuals may also form a bidding rosca in which the pot is allocated via a bidding procedure. The individual who

142 citations


Posted Content
TL;DR: In this article, the authors identify an opposing bias: a situation in which a failure to anticipate the informational content of a bid's acceptance will cause one to bid below the optimal bid, resulting in a "loser's curse."
Abstract: If the value of a commodity is unknown, a prospective buyer must realize that a bid based on an overestimate of its value is likely to be accepted. In this situation, merely finding out that one’s bid is accepted may cause one to reduce the estimate of a commodity’s value, so winning an auction can bring a feeling of regret. 1 Acceptance of a bid is an informative event, and failure to incorporate this contingent information into the bidding strategy can lead to excessive bids and subsequent losses, a result widely known as the "winner’s curse." 2 There is considerable anecdotal evidence that bidders for a prize of uncertain value fall prey to the winner’s curse, and persistent overbidding has also been observed in laboratory experiments. 3 There is a second factor that can also induce overbidding: the thrill of winning. This raises the possibility that overbidding is due to a "utility of winning" instead of being the result of an irrational failure to anticipate the informational content of a bid’s acceptance. One way to distinguish these explanations is to examine a situation in which the winner’s curse effect is neutralized, to see if bids are still too high. In order to neutralize the winner’s curse, we identify an opposing bias: a situation in which a failure to anticipate the informational content of a bid’s acceptance will cause one to bid below the optimal bid, resulting in a "loser’s curse." Since the loser’s curse produces underbidding, its effect is the opposite of that arising from the winner’s curse.

114 citations


Journal ArticleDOI
TL;DR: In this article, the authors developed a Cournot oligopoly model of an industry with a potential entrant and established the existence of an equilibrium in which the types of potential entrants differentiate themselves by the entry strategy chosen.
Abstract: The authors develop a Cournot oligopoly model of an industry with a potential entrant. Entry into the industry can be effected either directly or through acquisition of an incumbent. They establish the existence of an equilibrium in which the types of potential entrant differentiate themselves by the entry strategy chosen. A takeover offer generated by this behavior reveals information to the capital markets, which respond in a manner consistent with the empirical evidence by driving up the value of the targeted incumbent and driving down the value of the bidding entrant. Copyright 1994 by University of Chicago Press.

110 citations


Journal ArticleDOI
TL;DR: In this article, the authors examine the choice of levels at which bids will be allowed and also present a simple model of the role of the discrete levels in bidding strategy, and develop a model in which it is equilibrium behavior always to make the minimum allowed advance.

108 citations


Journal ArticleDOI
TL;DR: This article examined the rewards and risks of the Treasury coupon auctions for bidders who face different tradeoffs between the winner's curse and quantity risk, and found that when-issued rates react as strongly to bidding aggressiveness at auctions before the auction results are announced as they do afterward.

78 citations


Journal ArticleDOI
TL;DR: In this paper, the authors discuss the bidding strategies for the certificates of entitlement (COE) under both the transferable and nontransferable auctions, as well as the equity of the present system and the desirability of transferable COEs.
Abstract: This paper reviews the developments since the vehicle quota system was introduced in Singapore in May 1990. We discuss the bidding strategies for the certificates of entitlement (COE) under both the transferable and nontransferable auctions, as well as the equity of the present system and the desirability of transferable COEs. We argue that the COE auction should be made discriminatory and propose an alternative system of COE auction that we feel is both equitable and at the same time politically acceptable. We also survey developments in market competition in the car industry.

71 citations


01 Nov 1994
TL;DR: In this paper, a multivariate approach to contract bidding strategies in the construction industry is presented, which represents a radical departure from previous work in the field by using all available data on competing bidders.
Abstract: A multivariate approach to contract bidding strategies in the construction industry is presented. This represents a radical departure from previous work in the field by using all available data on competing bidders. 'Optimal', 'no loss' and 'break even' mark up strategies are derived and methods of parameter estimation proposed. A case study shows how the three strategic mark up values are calculated against known competitors.

01 Jan 1994
TL;DR: In this article, the authors describe the relationships between different models of the takeover process, and where possible provide analytical syntheses to integrate major trends in the literature, focusing mainly on three types of models: (1) models of tender offers, which examine the decisions of individual shareholders whether to tender (sell) their shares to a bidder, (2) model of competition among multiple bidders, and (3) models that examine the voting power of target managers who own shares.
Abstract: A merger is a transaction that combines two firms, leaving one surviving entity. An acquisition is the purchase of one firm by another individual or firm. Both transactions fall under the more general heading of takeovers. Takeovers can play a constructive economic role, for example by removing inefficient management or by achieving economies of scale and complementarity. On the other hand, they can have the possibly less desirable effect of redistributing wealth, as in takeovers that exploit tax benefits or expropriate bondholders or stakeholders. Finally, takeovers may reduce efficiency if they reflect agency problems on the part of bidding managers, or result simply from misjudgments. There are many important conflicts of interest and informational differences among parties to takeovers: bidding shareholders who only want an acquisition if the price of the target is not too high compared to underlying value, bidding management who may seek self-aggrandization through takeover, target shareholders who wish to obtain a price that fully reflects any possible takeover improvements, target management who wish to retain private benefits of control, and potential competing bidders deciding whether to make their own offers. This essay describes the relationships between different models of the takeover process, and where possible provides analytical syntheses to integrate major trends in the literature. I focus mainly on three types of models: (1) models of tender offers, which examine the decisions of individual shareholders whether to tender (sell) their shares to a bidder, (2) models of competition among multiple bidders, and (3) models that examine the voting power of target managers who own shares, l Beginning with (1), tender offers to purchase shares directly from shareholders are a crucial mechanism for overcoming management opposition to takeover,

Journal ArticleDOI
TL;DR: In this article, a multivariate approach to contract bidding strategies in the construction industry is presented, which represents a radical departure from previous work in the field by using all available data on competing bidders.
Abstract: A multivariate approach to contract bidding strategies in the construction industry is presented. This represents a radical departure from previous work in the field by using all available data on competing bidders. ‘Optimal’, ‘no loss’ and ‘break even’ mark-up strategies are derived and methods of parameter estimation proposed. A case study shows how the three strategic mark-up values are calculated against known competitors.

Journal ArticleDOI
TL;DR: In this article, an experimental examination of the assignment problem, matching individuals to positions or slots, is conducted in which various assignment mechanisms are analyzed, including generalized versions of both the Vickrey and English auctions, along with oridinal ranking mechanisms.
Abstract: An experimental examination of the assignment problem, matching individuals to positions or slots, is conducted in which various assignment mechanisms are analyzed. Generalized versions of both the Vickrey and English auctions are designed to solve the assignment problem along with oridinal ranking mechanisms (serial dictator and “funny” money system). The generalized auctions result in efficient allocations. In contrast, the ordinal ranking mechanisms, which require no monetary transfers, are significantly less efficient in their assignments. However, the efficient allocations obtained from the competitive bidding processes are at the expense of consumers' surplus since demanders retain significantly larger profits with the ordinal ranking mechanisms.

Journal ArticleDOI
TL;DR: In this article, the authors examine the relation between the medium of exchange (cash or stock) and valuation effects associated with terminated merger proposals and conclude that target firm shares are re-valued according to private information signaled by the offer medium that pertains to the target firm's stand-alone value or its unique synergy potential.
Abstract: In this study, we examine the relation between the medium of exchange (cash or stock) and valuation effects associated with terminated merger proposals. We find significantly higher returns for target shareholders after termination of cash offers than after termination of stock offers. This difference persists even when a subsequent merger bid does not follow and regardless of the following factors: the party deciding to terminate the offer, the presence of an acquisition program, prior foothold position, relative size of the acquisition, or the presence of competing offers. We conclude that target firm shares are re-valued according to private information signaled by the offer medium that pertains to the target firm's stand-alone value or its unique synergy potential. Bidding firm shareholders experience insignificant returns, and these returns are not affected by any of the factors analyzed.

Journal ArticleDOI
Abstract: The four principal leasing systems-work program, royalty, profit share (including rent resource tax), and bonus bidding are reviewed relative to their efficiency in maximizing and collecting the present value of economic rents. Empirical research is shown to support theoretical conclusions that the most efficient system appears to be bonus bidding, without a fixed royalty, with leases issued in perpetuity, with environmental and other regulations required to pass a benefit/cost test, and with elimination of any nationalistic or other barriers to entry.

Posted Content
TL;DR: The lack of an appropriate regulatory environment is a principal factor behind inadequate water and sanitation services in many parts of Latin America as discussed by the authors, and many governments recognize the need to improve cost recovery and accountability in services - and increasingly see private sector participation as a tool for improving efficiency and attracting commercial sources of investment finance.
Abstract: The lack of an appropriate regulatory environment is a principal factor behind inadequate water and sanitation services in many parts of Latin America. Many governments recognize the need to improve cost recovery and accountability in services - and increasingly see private sector participation as a tool for improving efficiency and attracting commercial sources of investment finance. Consultants interviewed representatives of private companies that recently contended for contracts to provide water and sanitation services in four Latin American cities (Buenos Aires, Caracas, Mexico City, and Santiago). These private operators identify the regulatory conditions they look for deciding whether to participate in a bid. On the basis of the interviews, the authors identified nine conditions. (1) Specify key terms and conditions of regulation in the contract, leaving little discretionary power to the regulating authority. In particular, specify the key aspects of regulation (such as price, quantity, and quality) in the contract. (2) Spell out credible procedures for the fair resolution of disagreements about contractual or regulatory matters. (3) Carefully specify credible technical objectives which the contractor will be expected to achieve under the contract. (4) See that government tariff policies support the principle of cost recovery for water services - and that tariff adjustment formulas adequately reflect changes in costs, inflation, and the exchange rate. (5) If historical collection rates do not indicate consumers' willingness to pay for services such as tariffs that reflect the cost of service, allow an adequate period of time to phase in higher tariffs - and give the operator adequate protection from nonpayers (either the right to cut off service or recourse to another source of payment). (6) Review public works law, contract law, and accounting practices and, if necessary, amend them in advance to ensure that they accommodate and protect any long-term investments foreseen under build-own-transfer or concession-type arrangements. (7) Eliminate unnecessary and bureaucratic administrative requirements that make bidding expensive. (8) Make a contract and expected profits big enough to warrant the high fixed cost of bidding. (9) Provide the education and outreach needed to inform consumers and secure the support of labor interests. In addition, the firms interviewed said that host countries would be better able to attract private-sector providers if they: (a) used reputable outside technical, legal, and financial advisors; (b) allowed local and foreign banks that finance investments to review and comment on proposed contracts and participate in negotiations; and (c) reduced the cost of bidding for small contracts.


Book
30 Sep 1994
TL;DR: In this paper, the authors describe how private power development projects can be undertaken through a competitive bidding process and identify the key elements that are needed in the host country business environment for successful project development such as a stable macroeconomic environment, clear policies and procedures for project approval and processing.
Abstract: This paper describes how private power development projects can be undertaken through a competitive bidding process. It identifies the key elements that are needed in the host country business environment for successful project development such as a stable macroeconomic environment, clear policies and procedures for project approval and processing. The main focus is on the development of power generation projects on a limited or non-recourse basis using a project financing approach. The paper reviews the specific risks involved for the power purchaser, the project developer and the lenders and in particular how those risks can be shared and minimized. The chapter on the security package describes the main agreements which make up the package which must formalize the various undertakings between the parties and provide assurance to lenders that their loans will be repaid. Finally, the process of seeking competitive bids is explained, along with of requests for proposals and the appropriateness of accepting unsolicited proposals. A two step selection and evaluation process is proposed. An example of a suitable bid evaluation procedure is also given.

ReportDOI
01 May 1994
TL;DR: In this paper, the authors developed methods to compare bid prices and program costs among utilities and characterize approaches used by utilities and developers to allocate risks associated with DSM resources based on their review of a large sample of signed contracts.
Abstract: In December 1987, Central Maine Power (CMP) instituted the first competitive bidding program that allowed developers to propose installation of conservation measures. Since then, about 30 utilities in 14 states have solicited bids from energy service companies (ESCOs) and customers to reduce energy demand in residential homes and in commercial and industrial facilities. Interest in the use of competitive procurement mechanisms for demand-side resources continues to grow. In this study, the authors build upon earlier work conducted by LBL in collaboration with others (Goldman and Busch 1992; Wolcott and Goldman 1992). They have developed methods to compare bid prices and program costs among utilities. They also characterize approaches used by utilities and developers to allocate risks associated with DSM resources based on their review of a large sample of signed contracts. These contracts are analyzed in some detail because they provide insights into the evolving roles and responsibilities of utilities, customers, and third party contractors in providing demand-side management (DSM) services. The analysis also highlights differences in the allocation of risks between traditional utility rebate programs and DSM bidding programs.

Journal ArticleDOI
TL;DR: In this paper, the authors studied alternative methods of privatizing a formerly communist firm in the presence of imperfect risk markets, including cash sales, a give-away scheme, and a participation contract where the government retains a sleeping fractional ownership in the firm.

Proceedings ArticleDOI
31 Jan 1994
TL;DR: Three adaptive bidding load balancing algorithms, each of which balances the workload on hosts (nodes) using different amounts of system state information in a heterogeneous distributed system model, are described.
Abstract: Describes three adaptive bidding load balancing algorithms, each of which balances the workload on hosts (nodes) using different amounts of system state information in a heterogeneous distributed system model. A key feature of these algorithms is that they attempt to balance the virtual delay (unfinished work) of each node. Using simulation, the algorithms are examined and compared with Eager's (1986) 'shortest algorithm', an efficient algorithm in homogeneous systems. Results show that the simple algorithms we consider in this paper, which use very little system state information, yield dramatic performance improvements over the case of no load balancing and perform much better than Eager's algorithm. >

Journal ArticleDOI
TL;DR: In this paper, sport tourism bidding for international events is discussed. But the authors focus on the bidding process and do not consider the economic aspects of sport tourism. Journal of Sport & Tourism: Vol. 1, No. 4, pp. 8-11.
Abstract: (1994). Sports tourism – bidding for international events. Journal of Sport & Tourism: Vol. 1, No. 4, pp. 8-11.

01 Jan 1994
TL;DR: In this paper, a multivariate approach to contract bidding strategies in the construction industry is presented, which represents a radical departure from previous work in the field by using all available data on competing bidders.
Abstract: A multivariate approach to contract bidding strategies in the construction industry is presented. This represents a radical departure from previous work in the field by using all available data on competing bidders. 'Optimal', 'no loss' and 'break even' mark up strategies are derived and methods of parameter estimation proposed. A case study shows how the three strategic mark up values are calculated against known competitors.

Posted Content
TL;DR: In this article, the authors argue that when the offer price of an IPO is set many days before the issue closes for bidding by investors (as is the case in countries such as Hong Kong, Singapore and the U.K.), relevant price information leaks and becomes public knowledge before investors have finished bidding for firm's shares.
Abstract: We argue that when the offer price of an IPO is set many days before the issue closes for bidding by investors (as is the case in countries such as Hong Kong, Singapore and the U.K.), relevant price information leaks and becomes public knowledge before investors have finished bidding for firm's shares. Consequently, there are instances when all investors realize ex ante that the offer price is ``too low'' and we observe a large oversubscription for firm's shares. There are also instances when the investors realize that the offer price is ``too high'' and the issue fails. In order to reduce the likelihood of instances in which the issue fails, the offering is underpriced. We further argue that if the underwriter collects the interest float on checks deposited by investors for shares they bid, this interest revenue reduces the cost associated with underpricing and thus provides an incentive to underprice the issue further. Our analysis allows us to explore some empirical and policy implications.

Journal ArticleDOI
TL;DR: In this paper, the same land is auctioned twice; first the land is broken into tracts and each tract is individually auctioned, then the tracts are reassembled and auctioned as a whole parcel.
Abstract: A unique feature of land auctions is that the same land is auctioned twice; first the land is broken into tracts and each tract is auctioned individually. Then, the tracts are reassembled and auctioned as a whole parcel. After the two auctions are completed, the seller chooses the one that generates a higher revenue. The main purpose of this paper is to provide an explanation of why such an auction design is employed to sell farmland. We also show that this feature of land auctions leads to interesting interaction among the bidding strategies of the players in each of the two auction stages.

Journal ArticleDOI
TL;DR: In this article, the authors investigate the choice between hiring syndicates through competitive bidding and negotiation and find that making syndicates compete can result in inferior terms because of inefficiencies like less effective search, possibly less total search, and trapped bidders.
Abstract: The authors investigate the choice between hiring syndicates through competitive bidding and negotiation. Making syndicates compete can result in inferior terms because of inefficiencies like less effective search, possibly less total search, and trapped bidders. Empirical results are consistent with the authors' hypotheses that purchasing syndicates search less under competition and that competition produces trapped bidders. The results also show that the primary market is rigidly divided under competition. When this occurs, total search under competitive bidding can be less than total search under negotiation. This may explain why competitive bidding is not favored in spite of its lower cost. Copyright 1994 by University of Chicago Press.

Dissertation
01 Jan 1994
TL;DR: In this article, the authors investigated the relationship between competitiveness and variability in bidding and concluded that large bidders are more competitive on larger contracts and vice versa, and the most competitive contractors appear to be those with a preferred contract size range.
Abstract: Flanagan and Norman (1982b) examined the bidding performances of three contractors. In developing this study, the aim of this research is to demonstrate through statistical modelling that, in terms of competitiveness, competing contractors are influenced, to varying degrees, by contract type and size and that a competitiveness relationship exists between contractor size and contract size. Bidding behaviour between construction firms is regarded as the outcome of strategic management decisions undertaken in an economic setting. Contractors are seen to compete for construction work in a competitive environment made up of a series of market sectors, each containing an amalgam of contract types and sizes, while clients are viewed as initiators of the whole contracting process. Contractors are shown to respond to client demands by deciding on a strategic domain within which to operate, which contracts to bid for and, if opting to bid, the appropriate bid level. Two approaches to modelling competitiveness are offered. The first approach examines the relationship between competitiveness and variability in bidding and a four-way classification system of bidder behaviour is developed. The main goal of this work, however, is contained in the second approach, which uses multiple regression to construct a competitiveness model - a prediction equation relating bidder competitiveness (the dependent variable) to the independent variables of bidder (analysed individually and also grouped according to size), contract type and contract size. The regression model shows that differences in competitiveness are greater for different contract sizes than different contract types. The most competitive contractors appear to be those with a preferred contract size range. The results are inconclusive in providing evidence that large bidders are more competitive on larger contracts and vice versa.

Journal ArticleDOI
TL;DR: The competitive bidding process is the method by which firms efficiently and effectively make purchases for necessary goods and services at a desired level of quality as mentioned in this paper, which can create a tremendous competitive advantage in the marketplace.
Abstract: The competitive bidding process is the method by which firms efficiently and effectively make purchases for necessary goods and services at a desired level of quality. Those firms with managers who understand the competitive bid process and are sufficiently sophisticated with regard to its implementation can create a tremendous competitive advantage in the marketplace. Explains the concept of buyer sophistication in terms of the skills necessary for successful competition in markets heavily influenced by the competitive bid process. Places particular emphasis on how the seller must map the sophistication level of the buyer in order to determine the most appropriate sales and negotiation strategy.

Journal ArticleDOI
TL;DR: In this paper, a knowledge-based system composed of intelligent rules which are taken from previous contract records and experienced managers in charge of bidding is used to advise managers on two major issues; Bid/No bid and estimation of optimal tender price.
Abstract: The knowledge‐based systems in this paper, composed of intelligent rules which are taken from previous contract records and experienced managers in charge of bidding. The aim is to advise managers on two major issues; Bid/No bid and estimation of optimal tender price.