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The Winner's Curse and the Failure of the Law of Demand

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Author Info
Bulow, Jeremy I
Klemperer, Paul

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Abstract

We usually assume increases in supply, allocation by rationing, and exclusion of potential buyers will never raise prices. But all of 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’ when buyers are symmetric, small asymmetries among buyers necessarily cause the anomalies to reappear.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1754.

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Date of creation: Nov 1997
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Handle: RePEc:cpr:ceprdp:1754

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Related research
Keywords: Airwaves Auction; Auction Theory; Common Value; Initial Public Offering; IPOs; PCS Auction; Spectrum Auction; Winner's Curse;

Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
G30 - Financial Economics - - Corporate Finance and Governance - - - General
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

Cited by:
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  1. Matthew Shum, 1998. "The Econometrics Of English Auctions," Working Papers mshum-98-02, University of Toronto, Department of Economics. [Downloadable!]
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This page was last updated on 2009-12-31.

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