How to overcome "the winner's curse" - Kako preseči "prekletstvo zmagovalca"

author: Vesna Prašnikar, Carnegie Mellon University
published: Feb. 25, 2007,   recorded: January 2003,   views: 83

Related content

Report a problem or upload files

If you have found a problem with this lecture or would like to send us extra material, articles, exercises, etc., please use our ticket system to describe your request and upload the data.
Enter your e-mail into the 'Cc' field, and we will keep you updated with your request's status.
Lecture popularity: You need to login to cast your vote.
  Bibliography

Description

We conduct experiments on common value auctions with rationing. In each auction, the good is randomly allocated to each of the K highest bidders, at (K+1)st highest price. As the degree of rationing increases, the theoretical winner's curse decreases, and the equilibrium bid function increases.

Experimentally, we find that bidders suffer from the winner's curse, and lose money on average. However, the bids in the experiments do adjust in the appropriate direction as the degree of rationing changes, providing support for the comparative statics implications of the theory. We demonstrate the connection between the experimental results and a theoretical measure of the winner's curse.

Our results are consistent with subjects having an intuitive understanding of the winner's curse, but being unable to compute the equilibrium bid levels.

Link this page

Would you like to put a link to this lecture on your homepage?
Go ahead! Copy the HTML snippet !

Write your own review or comment:

make sure you have javascript enabled or clear this field: