Anomalies

The Winner's Curse

Dados Bibliográficos

ID5088674
AutoresRichard H Thaler (0000-0001-7550-2855, Cornell University, autor correspondente)
Ano1988
Volume2
Fascículo1
Páginas191-202
Data de publicação1988-02-01
Peer ReviewedSim
Open AccessSim
TipoARTICLE
PeriódicoThe Journal of Economic Perspectives (JOURNAL)
Identificadores do periódicoISSN: 0895-3309 • E-ISSN: 1944-7965
EditoraAmerican Economic Association (PUBLISHER • US)
DOI10.1257/jep.2.1.191
OpenAlexW2075832535
IdiomaEN
Citações recebidas36
Referências citadas14

Next time that you find yourself a little short of cash for lunch, try the following experiment in your class. Take a jar and fill it with coins, noting the total value of the coins. Now auction off the jar to your class (offering to pay the winning bidder in bills to control for penny aversion). Chances are very high that the following results will be obtained: (1) the average bid will be significantly less than the value of the coins (bidders are risk averse); (2) the winning bid will exceed the value of the jar. Therefore, you will have money for lunch, and your students will have learned first-hand about the "winner's curse." The winner's curse cannot occur if all the bidders are rational, so evidence of a winner's curse in market settings would constitute an anomaly. However, acting rationally in a common value auction can be difficult. Solving for the optimal bid is not trivial. Thus, it is an empirical question whether bidders in various contexts get it right or are cursed. I will present some evidence, both from experimental and field studies, suggesting that the winner's curse may be a common phenomenon

Cash · Common value auction · Curse · Economics · English auction · Financial economics · Microeconomics · Phenomenon · Winner's curse · Auction Theory and Applications · Computer Science · Consumer Market Behavior and Pricing · Experimental Behavioral Economics Studies · Finance