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The Origin of the Winner's Curse: A Laboratory Study Author info | Abstract | Publisher info | Download info | Related research | Statistics Gary Charness
Dan Levin
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The Winner's Curse (WC) is a robust and persistent deviation from theoretical predictions established in experimental economics and claimed to exist in field environments. Recent attempts to reconcile such deviation include "cursed equilibrium" and level-k reasoning. We design and implement a simplified version of the Acquiring-a-Company game that transformed the game to an individual-choice problem that still retains the adverse-selection problem. We further simplified the problem so that simple ordinal reasoning could replace both Bayesian updating and contingent thinking. Our results suggest that the WC reflects bounded rationality in that people have difficulties performing contingent reasoning on future events. (JEL D81, D82)
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Article provided by American Economic Association in its journal American Economic Journal: Microeconomics .
Volume (Year): 1 (2009)
Issue (Month): 1 (February)
Pages: 207-36
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Handle: RePEc:aea:aejmic:v:1:y:2009:i:1:p:207-36Contact details of provider: Email: Web page: http://www.aeaweb.org/aej-micro More information through EDIRC
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Akerlof, George A, 1970.
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Dyer, Douglas & Kagel, John H & Levin, Dan, 1989.
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"Revenue Effects and Information Processing in English Common Value Auctions ,"
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JEFFREY J. LElTZlNGER & JOSEPH E. STIGLITZ, 1984.
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Levis, Mario, 1990.
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Brit Grosskopf & Yoella Bereby-Meyer & Max Bazerman, 2007.
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Kagel, John H & Levin, Dan & Harstad, Ronald M, 1995.
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"When Optimal Choices Feel Wrong: A Laboratory Study of Bayesian Updating, Complexity, and Affect ,"
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[Downloadable!]
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
John D. Burger & Stephen J.K. Walters, 2006.
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07/09, Department of Economics, University of York.
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Vincent P. Crawford & Nagore Iriberri, 2005.
"Level-k Auctions: Can a Non-Equilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions? ,"
Levine's Bibliography
784828000000000604, UCLA Department of Economics.
[Downloadable!]
Other versions:
Vincent Crawford & Nagore Iriberri, 2005.
"Level-k Auctions: Can a Non-Equilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions? ,"
University of California at San Diego, Economics Working Paper Series
2005-13, Department of Economics, UC San Diego.
[Downloadable!] Vincent P. Crawford & Nagore Iriberri, 2006.
"Level-k Auctions: Can a Non-Equilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions? ,"
Levine's Bibliography
321307000000000256, UCLA Department of Economics.
[Downloadable!] Vincent P Crawford & Nagore Iriberri, 2007.
"Level-k Auctions: Can a Non-Equilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions? ,"
Levine's Bibliography
321307000000001005, UCLA Department of Economics.
[Downloadable!] Vincent P. Crawford & Nagore Iriberri, 2007.
"Level-k Auctions: Can a Nonequilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions? ,"
Econometrica ,
Econometric Society, vol. 75(6), pages 1721-1770, November.
[Downloadable!] (restricted)
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