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IN SEARCH OF THE WINNER'S CURSE
Author(s) -
COX JAMES C.,
ISAAC R. MARK
Publication year - 1984
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1984.tb00705.x
Subject(s) - winner's curse , curse , ex ante , economics , bidding , microeconomics , common value auction , vickrey auction , vickrey–clarke–groves auction , auction theory , keynesian economics , sociology , anthropology
Earlier papers on the winner's curse have provided theoretical arguments that winning bidders in an auction will incur ex post losses even when all bidders use reasonable ex ante bidding strategies. This paper demonstrates that these arguments are erroneous: optimal ex ante bidders will never suffer from a winner's curse in an auction where only the winning bid is announced; furthermore, such bidders will on the average not suffer from a winner's curse in an auction where all bids are announced. Thus if a winner's curse is a behavioral reality then bidders are not generally using ex ante optimal strategies.