IDEAS home Printed from https://ideas.repec.org/a/oup/ecinqu/v27y1989i2p241-58.html
   My bibliography  Save this article

First-Price Common Value Auctions: Bidder Behavior and the "Winner's Curse."

Author

Listed:
  • Kagel, John H, et al

Abstract

Experimental auction markets are characterized by a strong winner's curse in early auction periods as high bidders consistently lose money, failing to account for the adverse selection problem inherent in winning the auction. With experience and bankruptcy on the part of the worst offenders, subjects earn positive average profits, but these are far below Nash equilibrium predictions as a sizable minority of bids exceed the expected value of the item conditional on having the highest estimate of value. Individual bidding behavior is explored to identify the mechanism whereby market outcomes no longer display the worst effects of the winner's curse. Coauthors are Dan Levin, Raymond C. Battalio, and Donald J. Meyer. Copyright 1989 by Oxford University Press.

Suggested Citation

  • Kagel, John H, et al, 1989. "First-Price Common Value Auctions: Bidder Behavior and the "Winner's Curse."," Economic Inquiry, Western Economic Association International, vol. 27(2), pages 241-258, April.
  • Handle: RePEc:oup:ecinqu:v:27:y:1989:i:2:p:241-58
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Goeree, Jacob K. & Offerman, Theo, 2003. "Winner's curse without overbidding," European Economic Review, Elsevier, vol. 47(4), pages 625-644, August.
    3. James Cox & Sam Dinkin & James Swarthout, 2001. "Endogenous Entry and Exit in Common Value Auctions," Experimental Economics, Springer;Economic Science Association, vol. 4(2), pages 163-181, October.
    4. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
    5. Wouter van den Bos & Jian Li & Tatiana Lau & Eric Maskin & Jonathan D. Cohen & P. Read Montague & Samuel M. McClure, 2008. "The value of victory: social origins of the winner's curse in common value auctions," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 3(7), pages 483-492, October.
    6. Ronald Peeters & Anastas P. Tenev, 2018. "Number of bidders and the winner’s curse," Working Papers 1802, University of Otago, Department of Economics, revised Jan 2018.
    7. Peeters, Ronald & Tenev, Anastas, 2016. "Number of bidders and the winner's curse," Research Memorandum 031, Maastricht University, Graduate School of Business and Economics (GSBE).
    8. James Cox & Stephen Hayne, 2006. "Barking up the right tree: Are small groups rational agents?," Experimental Economics, Springer;Economic Science Association, vol. 9(3), pages 209-222, September.
    9. Theo Offerman, 2002. "Efficiency in Auctions with Private and Common Values: An Experimental Study," American Economic Review, American Economic Association, vol. 92(3), pages 625-643, June.
    10. Wilfred Amaldoss & Sanjay Jain, 2008. "Joint Bidding in the Name-Your-Own-Price Channel: A Strategic Analysis," Management Science, INFORMS, vol. 54(10), pages 1685-1699, October.
    11. Shahriar, Quazi & Wooders, John, 2011. "An experimental study of auctions with a buy price under private and common values," Games and Economic Behavior, Elsevier, vol. 72(2), pages 558-573, June.
    12. Anuja Hariharan & Marc Thomas Philipp Adam & Timm Teubner & Christof Weinhardt, 2016. "Think, feel, bid: the impact of environmental conditions on the role of bidders’ cognitive and affective processes in auction bidding," Electronic Markets, Springer;IIM University of St. Gallen, vol. 26(4), pages 339-355, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:ecinqu:v:27:y:1989:i:2:p:241-58. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/weaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.