The Texas Shootout under Uncertainty

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Tác giả: Gerrit Bauch, Frank Riedel

Ngôn ngữ: eng

Ký hiệu phân loại: 509.764 Historical, geographic, persons treatment

Thông tin xuất bản: 2022

Mô tả vật lý:

Bộ sưu tập: Báo, Tạp chí

ID: 196067

Comment: 46 pages, 9 figuresWe investigate the allocation of a co-owned company to a single owner using the Texas Shoot-Out mechanism with private valuations. We identify Knightian Uncertainty about the peer's distribution as a reason for its deterrent effect of a premature dissolving. Modeling uncertainty by a distribution band around a reference distribution $F$, we derive the optimal price announcement for an ambiguity averse divider. The divider hedges against uncertainty for valuations close to the median of $F$, while extracting expected surplus for high and low valuations. The outcome of the mechanism is efficient for valuations around the median. A risk neutral co-owner prefers to be the chooser, even strictly so for any valuation under low levels of uncertainty and for extreme valuations under high levels of uncertainty. If valuations are believed to be close, less uncertainty is required for the mechanism to always be efficient and reduce premature dissolvements.
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