Private Value Takeover Auctions with Toeholds: An Experimental Study

This paper presents the results of an experimental study takeover auctions with toeholds. Consistent theory, we find a positive effect toeholds on bidding. Such effect, however, is lower magnitude and bidding premium function has opposite slope than theory predicts, which can be attributed both to risk aversion subjects’ tendency think their bids in relative terms. no cross-bidder toehold such result inconsistent observed if people expect opponents behave same way as they do.