The Existence and Persistence of a Winner's Curse: New Evidence from the (Baseball) Field
This study takes advantage of recent developments in the measurement and valuation of individual output in the baseball labor market to (i) reassess prior evidence that this market is afflicted by the winner's curse phenomenon and (ii) test whether bidders learn to avoid this curse over time. Though we find no evidence of negative average returns on player contracts for the earliest cohort of baseball free agents, we conclude that teams in that era failed to efficiently discount their bids in accord with available information, especially about risk. What is more, evidence from a larger sample of players signed in the late 1990s shows that teams have continued to overvalue inconsistent free agents and failed to limit their bids to conform to players' lower values in small markets. This is consistent with experimental evidence that finds bounded-rational behavior when bidders are faced with complex valuation problems involving multiple elements.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" 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.
Volume (Year): 75 (2008)
Issue (Month): 1 (July)
|Contact details of provider:|| Web page: http://www.southerneconomic.org/|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gary Charness & Dan Levin, 2005.
"The Origin of the Winner’s Curse: A Laboratory Study,"
666156000000000602, UCLA Department of Economics.
- Gary Charness & Dan Levin, 2009. "The Origin of the Winner's Curse: A Laboratory Study," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 207-36, February.
- Scully, Gerald W, 1974. "Pay and Performance in Major League Baseball," American Economic Review, American Economic Association, vol. 64(6), pages 915-30, December.
- Hendricks, Kenneth & Porter, Robert H, 1988. "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, American Economic Association, vol. 78(5), pages 865-83, December.
- Koh, Francis & Walter, Terry, 1989. "A direct test of Rock's model of the pricing of unseasoned issues," Journal of Financial Economics, Elsevier, vol. 23(2), pages 251-272, August.
- John Goddard & Peter J. Sloane, 2005. "Economics of sport," Chapters, in: Economics Uncut, chapter 12 Edward Elgar.
- Anthony Krautmann, 2009. "Market size and the demand for talent in major league baseball," Applied Economics, Taylor & Francis Journals, vol. 41(25), pages 3267-3273.
- Edward P. Lazear, 1995. "Hiring Risky Workers," NBER Working Papers 5334, National Bureau of Economic Research, Inc.
- Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April.
- Krautmann, Anthony C, 1999. "What's Wrong with Scully-Estimates of a Player's Marginal Revenue Product," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 369-81, April.
- Paul M. Sommers & Noel Quinton, 1982. "Pay and Performance in Major League Baseball: The Case of the First Family of Free Agents," Journal of Human Resources, University of Wisconsin Press, vol. 17(3), pages 426-436.
- Christopher R. Bollinger & Julie L. Hotchkiss, 2003. "The Upside Potential of Hiring Risky Workers: Evidence from the Baseball Industry," Journal of Labor Economics, University of Chicago Press, vol. 21(4), pages 923-944, October.
When requesting a correction, please mention this item's handle: RePEc:sej:ancoec:v:75:1:y:2008:p:232-245. 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: (Laura Razzolini)
If references are entirely missing, you can add them using this form.