Winner's Curse without Overbidding
| Authors |
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| Publication date |
2003
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| Journal |
European Economic Review
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| Volume | Issue number |
47
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| Pages (from-to) |
625-644
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| Number of pages |
20
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| Organisations |
-
Faculty of Economics and Business (FEB) - Amsterdam School of Economics Research Institute (ASE-RI)
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| Abstract |
We report the results of a series of second-price auction experiments where each bidder's signal is given by a normally distributed value plus a normally distributed error. While bidders’ values differ in one treatment they are the same in another, which allows for a direct test of the "winner's curse" irrespective of confounding factors. Bidders may also fall prey to a "news curse" when they do not sufficiently take into account that signals and errors are correlated. We find that the effects of the winner's curse are mitigated by a news curse and loss or risk aversion.
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| Document type |
Article
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| Published at |
https://doi.org/10.1016/S0014-2921(02)00290-8
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