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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- Giuseppe Lopomo, 2004.
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122247000000000369, UCLA Department of Economics.
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- Vincenzo Denicolo' & Paolo Garella, 1999. "Rationing in a Durable Goods Monopoly," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 44-55, Spring.
- Patrick DeGraba, 1995. "Buying Frenzies and Seller-Induced Excess Demand," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 331-342, Summer.
- Christopher Avery & John H. Kagel, 1997. "Second-Price Auctions with Asymmetric Payoffs: An Experimental Investigation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 573-603, 09.
- Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
- Ian Ayres & Peter Cramton, 1996. "Deficit Reduction Through Diversity: How Affirmative Action at the FCC Increased Auction Competition," Papers of Peter Cramton 96slr, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
- R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
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