•   •   •

Rights of First Refusal Marcel Kahan, New York University Shmuel Leshem, USC School of Law Raghu Sundaram, NYU Download the Paper (PDF format) - October 1, 2007 Tell a colleague about it. Printing Tips: Select 'print as image' in the Acrobat print dialog if you have trouble printing. ABSTRACT: This paper analyses 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. SUGGESTED CITATION: Marcel Kahan, Shmuel Leshem, and Raghu Sundaram, "Rights of First Refusal" (October 1, 2007). New York University School of Law. New York University Law and Economics Working Papers. Paper 110. http://lsr.nellco.org/nyu/lewp/papers/110 | REPOSITORY HOME  | SEARCH  | MY ACCOUNT  | NELLCO HOME | Powered by bepress.