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ISSN: 2306-3483 (Online), 2071-8330 (Print)

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Strike Plagiarism


Conditional and unconditional bidding in takeovers: experimental evidence

Vol. 8, No 2, 2015

Adam Karbowski


Warsaw School of Economics Poland

Conditional and unconditional bidding in takeovers: experimental    evidence

Jacek Prokop


Warsaw School of Economics Poland


Abstract. The objective of this paper is to use laboratory experiments to test the dynamic theory of free riding among the target shareholders during a takeover attempt. We construct our experiments to reflect the dynamics of unconditional bidding suggested by Harrington and Prokop (1993) and the dynamics of conditional bidding analyzed by Prokop (2003). The experimental results show that the observed tendering probabilities are higher than the theoretically predicted values in the case of unconditional bidding. Thus the actual behavior of shareholders is characterized by much less free riding than predicted by the theory of unconditional tender offers. In the case of conditional offers, the theoretical predictions for the tendering probabilities are confirmed by the laboratory behavior of shareholders in the case of multiple bidding. As suggested by the theory, the tendering probabilities are lower under multiple conditional bids than under unconditional offers.


Received: March, 2015

1st Revision: May, 2015

Accepted: July, 2015

DOI: 10.14254/2071-


JEL Classification: G34

Keywords: takeovers, tender offers, conditional and unconditional bids, experiments