Auctions in corporate finance

The essays in this thesis explore the role of auctions in the arena of Corporate Finance. The first essay looks at the question of why it is that even the initial bid made in a tender offer is at a substantial premium. Our first contribution here is to generalize the extant preemptive bidding model to allow for partially preemptive bidding. We then demonstrate that bidding with a premium is a general feature of all private valuation models irrespective of the absence or presence of preemption motives. The second essay is a study of one of the largest auctions ever held: for the sale of Conrail by the U.S. Government. We point out the various assumptions of Auction Theory that are violated in this case and suggest possible remedies keeping in mind real world practices. As a clinical study, this essay puts forth several conjectures about optimal mechanism design which remain to be verified or disproved in future work.