Winner's curse without overbidding |
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Authors: | Jacob K Goeree |
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Institution: | Department of Economics/CREED, University of Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, Netherlands |
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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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Keywords: | C72 D44 |
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