The Texas Shoot-Out under Knightian Uncertainty

Bauch G, Riedel F (2022) Center for Mathematical Economics Working Papers; 664.
Bielefeld: Center for Mathematical Economics.

Diskussionspapier | Veröffentlicht | Englisch
 
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Abstract / Bemerkung
The allocation of a co-owned company to a single owner using the Texas Shoot-Out mechanism with private valuations is investigated. We identify Knightian Uncertainty about the peer’s distribution as the reason for its deterrent effect of an immature dissolving. Modeling uncertainty by a compact environment around a reference distribution *F* in the Prohorov metric, we derive the optimal price announcement for an ambiguity averse divider. The divider hedges against uncertainty for valuations close to the median of *F*, while extracting expected surplus for high and low valuations. The outcome of the mechanism is efficient for valuations around the median. A risk neutral co-owner prefers to be the chooser, even strictly so for any valuation under low levels of uncertainty and for extreme valuations under high levels of uncertainty.
Stichworte
Knightian Uncertainty in Games; Texas Shout-Out; Partnership Dissolution
Erscheinungsjahr
2022
Serientitel
Center for Mathematical Economics Working Papers
Band
664
Seite(n)
33
ISSN
0931-6558
Page URI
https://pub.uni-bielefeld.de/record/2962409

Zitieren

Bauch G, Riedel F. The Texas Shoot-Out under Knightian Uncertainty. Center for Mathematical Economics Working Papers. Vol 664. Bielefeld: Center for Mathematical Economics; 2022.
Bauch, G., & Riedel, F. (2022). The Texas Shoot-Out under Knightian Uncertainty (Center for Mathematical Economics Working Papers, 664). Bielefeld: Center for Mathematical Economics.
Bauch, G., and Riedel, F. (2022). The Texas Shoot-Out under Knightian Uncertainty. Center for Mathematical Economics Working Papers, 664, Bielefeld: Center for Mathematical Economics.
Bauch, G., & Riedel, F., 2022. The Texas Shoot-Out under Knightian Uncertainty, Center for Mathematical Economics Working Papers, no.664, Bielefeld: Center for Mathematical Economics.
G. Bauch and F. Riedel, The Texas Shoot-Out under Knightian Uncertainty, Center for Mathematical Economics Working Papers, vol. 664, Bielefeld: Center for Mathematical Economics, 2022.
Bauch, G., Riedel, F.: The Texas Shoot-Out under Knightian Uncertainty. Center for Mathematical Economics Working Papers, 664. Center for Mathematical Economics, Bielefeld (2022).
Bauch, Gerrit, and Riedel, Frank. The Texas Shoot-Out under Knightian Uncertainty. Bielefeld: Center for Mathematical Economics, 2022. Center for Mathematical Economics Working Papers. 664.
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2022-04-14T12:47:56Z
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