Author : Marcel Kahan
Release : 2013
Genre :
Kind : eBook
Book Rating : /5 ( reviews)
Book Synopsis First-Purchase Rights by : Marcel Kahan
Download or read book First-Purchase Rights written by Marcel Kahan. This book was released on 2013. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes rights of first refusal and rights of first offer in a multiple-buyer, sequential bargaining setting. A right of first refusal entitles the right-holder to purchase a subject asset on the same terms as those accepted by a third party. A right of first offer requires a seller to first offer the right-holder to buy a subject asset and prohibits the seller from subsequently selling the asset to a third party on better terms than those offered to the right-holder. We examine when and how such rights yield benefits to, or impose costs, on the right-holder and the seller. We show that a right of first refusal transfers value from other buyers to the right-holder, but may also force the seller to make suboptimal offers. A right of first offer induces the seller to lower his first-period offer, which will tend to increase the net surplus to the seller and right-holder, but also forces the seller to make suboptimal subsequent offers. We find conditions under which it is in the ex ante interest of the seller and the right-holder to contract for a right of first refusal or a right of first offer, respectively.
