Corporate Takeovers in the Laboratory When Shareholders Own More than One Share

Abstract

Tendering decisions of shareholders endowed with multiple shares are studied in the laboratory to test game-theoretic models of the tendering process. Tendered shares cycle around the equilibrium level. Contrary to game-theoretic predictions, bid level and bid type affect the number of shares tendered and the bid success rate. When players are given unequal endowments of shares, an equal proportion strategy organizes the data better than Holmstrom and Nalebuff's (1992) symmetric focal equilibrium in which larger shareholders tender down to a common share level. However, large shareholders often tender proportionately more shares than small shareholders.

JEL Classification: G34