Finance

This paper presents a model of bidding strategies in takeovers in which initially uninformed bidders must incur costs to learn their valuations of a target. In the case the the bidders' valuations are independent, the first bidder may make a pre-emptive bid, well above the market price of the shares-he does so to deter the second bidder from investigating. In the case that the bidders' valuations are common, the first bidder may bid low to conceal favourable information. I also investigate the relation between the price at which the target is taken over and the cost of investigation of the second bidder.