Topic: Optimal Equity Auctions When Bidders Are Ex-Ante Heterogeneous

Speaker: Tingjun Liu, Assistant Professor of Finance, Cheung Kong Graduate School of Business
Date:September 25, 2013 (Wed.)
Time:1:00-2:30pm
Location:Building 4, Room 101
Language:English

Abstract:
I analyze the effects of heterogeneity in terms of bidder sizes and distributions of synergy gains in auctions in which bidders pay with equities. Such heterogeneity complicates the selection of the winning bid, rendering the seller’s revenues sensitive to the auction design. Among all incentive-compatible mechanisms, I identify the optimal mechanism that maximizes the seller’s expected revenues. I show how bidder heterogeneity affects the optimal auction design, and obtain the distinct implications of different sources of bidder heterogeneity. The allocation in the optimal mechanism typically favors smaller bidders because the seller can extract a larger proportion of their rents.

About the speaker:
Tingjun Liu is an Assistant Professor of Finance at Cheung Kong Graduate School of Business. He obtained his Ph.D. in Financial Economics from Carnegie Mellon University in 2007 and Ph.D. in Physics from the University of Virginia in 1995. His research interests focus on the theoretical corporate finance, auction theory, and mergers and acquisition. Dr. Liu has published in theReview of Financial Studies,Journal of Financial Economicsand other academic leading journals.