Abstract
This paper develops a model of preemptive jump bidding in common value takeover auctions. It shows that in a case of common values jump bidding increases the social surplus, and, under certain conditions, can lead to higher expected seller’s revenue. It also demonstrates that an increase in investigation costs may improve social efficiency even if they lead to direct social costs. Based on its results, the paper provides several implications related to legal fees and the length of takeover auctions.
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