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Abstract:
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This paper characterizes the optimal selling mechanism in the pres-
ence of horizontal crossholdings. We nd that the optimal mechanism imposes a
discrimination policy against the stronger bidders so that the seller s expected rev-
enue is increasing in both the common crossholding and the degree of asymmetry
in crossholdings. Furthermore, it can be implemented by a sequential procedure
that includes a price-preferences scheme and the possibility of an exclusive deal
with the weakest bidder. We also show that a simple sequential negotiation mech-
anism, although suboptimal, yields a larger seller s expected revenue than both
the first-price and the second-price auctions. |