Creating a Winner's Curse via Jump Bids
We show that jump bids can be used by a bidder to create a winner's curse and preserve an informational advantage that would otherwise disappear in the course of an open ascending auction. The e ect of the winner's curse is to create allocative distortions and reduce the seller's expected revenue. Two novel features of equilibrium jump bids are also derived. First, the jump bid may partially reveal the value of the signal that the jump bid intends to hide. Second, the probability of calling a price might decrease with the type of the bidder who places the jump bid.
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