Thursday, 2 January 2020

In Sweden, firms that fail to meet their debt obligations are immediately auctioned off to the highest bidder

In Sweden, firms that fail to meet their debt obligations are immediately auctioned off to the highest bidder. (There is no reorganization through Chapter 11 bankruptcy.) The current managers are often the high bidders for the company. (Hint: Assume these auctions are common-value auctions.)
Suppose for a particular auction, the current managers have placed a bid of $15 million.
True or False: To avoid the winner's curse, you should avoid bidding in such auctions.
 True False
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