Prices and the Winner's Curse
AbstractWe usually assume that increases in supply, allocation by rationing, and exclusion of potential buyers reduce prices. But all these activities raise the expected price in an important set of cases when common-value assets are sold. Furthermore, when we make the assumptions needed to rule out these ``anomalies'' for symmetric buyers, small asymmetries among the buyers necessarily cause the anomalies to reappear. Our results help explain rationing in initial public offerings and outcomes of spectrum auctions. We illustrate our results in the ``Wallet Game'' and in another new game we introduce, the ``Maximum Game.''
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 33 (2002)
Issue (Month): 1 (Spring)
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Web page: http://www.rje.org
Other versions of this item:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
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0077, Boston University - Industry Studies Programme.
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- Lopomo, Giuseppe, 1998.
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Journal of Economic Theory,
Elsevier, vol. 82(1), pages 144-166, September.
- Giuseppe Lopomo, 2004. "The English Auction Is Optimal Among Simple Sequential Auctions," Levine's Bibliography 122247000000000369, UCLA Department of Economics.
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