Prices and the Winner's Curse
Abstract
We 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.''Download Info
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Bibliographic Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 33 (2002)
Issue (Month): 1 (Spring)
Pages: 1-21
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Handle: RePEc:rje:randje:v:33:y:2002:i:spring:p:1-21
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Related research
Keywords:Other versions of this item:
- Jeremy Bulow & Paul Klemperer, 1999. "Prices and the Winner's Curse," Game Theory and Information 9904003, EconWPA.
- 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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