Bidding

About: Bidding is a research topic. Over the lifetime, 15371 publications have been published within this topic receiving 294233 citations. The topic is also known as: competitive bidding.

Collars and Renegotiation in Mergers and Acquisitions

Abstract: I examine the motivation for, and effect of, including a collar in a merger agreement. The most important cross-sectional determinants of the bid structure (cash vs. stock, and whether to include a collar) are the market-related stock return standard deviations for the bidder and target. This evidence supports the hypothesis that the method of payment is dependent on the sensitivities of the bidder and target to market-related risk because either has the incentive to demand renegotiation of the merger terms if the value of the bidder's offer changes materially relative to the value of the target during the bid period. AN IMPORTANT DECISION MADE during merger or takeover negotiations is the method of payment to be offered to target shareholders. Takeover bids can be made in cash and/or some combination of securities issued by the bidding firm. A considerable number of papers in the finance literature provide empirical evidence on the determinants of the choice between stock and cash as the method of payment, including Carleton et al. (1983), Niden (1986), Crawford (1987), Auerbach and Reishus (1988), Amihud, Lev, and Travlos (1990), Chaney, Lovata, and Philipich (1991), and Martin (1996). However, this literature typically ignores the increasing fraction (20% in recent years) of stock merger bids that contain a "collar." While an ordinary stock merger bid specifies the number of bidder shares offered as consideration for each target share (the exchange ratio), a collar bid provides for certain changes in the exchange ratio conditional on the level of the bidder's stock price around the effective date of the merger, often insulating target stockholders from volatility in the bidder's stock price and promising a cash-like payoff at the end of the bid period. Collar bids come in two basic forms. The first, which I call fixed-exchange (FEX), specifies a constant exchange ratio over a range of bidder stock prices, with adjustment to the ratio outside those bounds. An example of this type of transaction is the merger agreement announced on January 17, 1994, between

Bidding for Industrial Plants: Does Winning a 'Million Dollar Plant' Increase Welfare? - eScholarship

Abstract: Increasingly, local governments compete by offering substantial subsidies to industrial plants to locate within their jurisdictions. This paper uses a novel research design to estimate the local consequences of successfully bidding for an industrial plant, relative to bidding and losing, on labor earnings, public finances, and property values. Each issue of the corporate real estate journal Site Selection includes an article titled The Million Dollar Plant that reports the county where a large plant chose to locate (i.e., the 'winner'), as well as the one or two runner-up counties (i.e., the 'losers'). We use these revealed rankings of profit-maximizing firms to form a counterfactual for what would have happened in the winning counties in the absence of the plant opening. We find that the plant opening announcement is associated with a 1.5% trend break in labor earnings in the new plant's industry in winning counties, as well as increased earnings in the same industry in counties that neighbor the winner. Further, there is modest evidence of increased expenditures for local services, such as public education. Property values may provide a summary measure of the net change in welfare, because the costs and benefits of attracting a plant should be capitalized into the price of land. If the winners and losers are homogeneous, a simple model suggests that any rents should be bid away. We find a positive, relative trend break of approximately 1.1-1.7% in property values. Since the winners and losers have similar observables in advance of the opening announcement, the property value results may be explained by heterogeneity in subsidies from higher levels of government (e.g., states) and/or systematic underbidding. Overall, the results undermine the popular view that the provision of local subsidies to attract large industrial plants reduces local residents' welfare.

Case-based reasoning approach in bid decision making

Abstract: Since contractors' bidding behaviors are affected by numerous factors related both to the specific features of the project and dynamically changed situations, bidding decision problems are highly unstructured. No clear rules can be found in delivering a bidding decision. In this problem domain, decisions are commonly made based upon intuition and past experience. Case-based reasoning (CBR) is a subbranch of artificial intelligence. It solves new problems by matching against similar problems that have been encountered and resolved in the past. It is a useful tool in dealing with complex and unstructured problems, which are difficult if not impossible to be theoretically modeled. This paper presents a case-based reasoning bidding system that helps contractors with the dynamic information varying with the specific features of the job and the new situation. In this system, bid cases are represented by sets of attributes derived from a preliminary survey of several experienced bidders, focusing, respectively, on two reasoning subgoals: (1) Risk; and (2) competition. Through the system, similar cases can be retrieved to assess the possible level of competition and risk margin. A hypothetical example is explained and evaluated to demonstrate the feasibility of the method. The effectiveness of this system is tested by a Monte Carlo simulation in comparison to the conventional statistical method.

Forward-looking Bidding in Online Auctions

Abstract: At Internet auction sites like eBay, similar goods are often sold in a sequence of auctions, separated by small amounts of time. Buyers can therefore benefit from forward-looking strategies that take into account available information about future auctions. This paper develops a model of such bidding, and provides empirical evidence of the model's relevance to behavior.

Multimarket optimal bidding for a power producer

Abstract: This paper considers a profit-maximizing thermal producer that participates in a sequence of spot markets, namely, day-ahead, automatic generation control (AGC), and balancing markets. The producer behaves as a price-taker in both the day-ahead market and the AGC market but as a potential price-maker in the volatile balancing market. The paper provides a stochastic programming methodology to determine the optimal bidding strategies for the day-ahead market. Uncertainty sources include prices for the day-ahead and AGC markets and balancing market linear price variations with the production of the thermal producer. Results from a realistic case study are reported and analyzed. Conclusions are duly drawn.