IDEAS home Printed from https://ideas.repec.org/p/jrp/jrpwrp/2011-027.html
   My bibliography  Save this paper

On Individual Cursedness - How personality shapes individuals' sensitivity to incur a winner's curse -

Author

Listed:
  • Nadine Chlaß

    (School of Economics and Business Administration FSU Jena)

Abstract

The winner's curse is a well-known deviation from rational self-interest in decision-making under asymmetric information. Yet, most prominent explanations for the curse have experimentally been ruled out so far. In particular, the curse did neither seem to emanate from a lack of experience with a given task (Grosskopf et al. 2007), nor from the complexity of the decision task, nor level-k thinking, nor a disability to infer information from others' actions (Charness and Levin 2009), (Ivanov et al. 2010). This paper elicits individuals' sensitivity to incur a winner's curse in a common-value auction where the explanations above do not apply, tracks down the potential source of the curse, and tests to what extent individuals' cursedness evolves (Fudenberg 2006). It finds that the curse is tightly associated with a relatively stable individual characteristic - individuals' personality traits. Personality traits explain individuals' initial cursedness, and also govern whether individuals unlearn, or instead, acquire the curse. I review biological evidence on how personality influences individuals' handling of information to explain why personality matters here.

Suggested Citation

  • Nadine Chlaß, 2011. "On Individual Cursedness - How personality shapes individuals' sensitivity to incur a winner's curse -," Jena Economic Research Papers 2011-027, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2011-027
    as

    Download full text from publisher

    File URL: http://www2.wiwi.uni-jena.de/Papers/jerp2011/wp_2011_027.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Vincent P. Crawford & Miguel A. Costa-Gomes & Nagore Iriberri, 2010. "Strategic Thinking," Levine's Working Paper Archive 661465000000001148, David K. Levine.
    2. Drew Fudenberg, 2006. "Advancing Beyond Advances in Behavioral Economics," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 694-711, September.
    3. Miettinen, Topi, 2009. "The partially cursed and the analogy-based expectation equilibrium," Economics Letters, Elsevier, vol. 105(2), pages 162-164, November.
    4. Asen Ivanov & Dan Levin & Muriel Niederle, 2010. "Can Relaxation of Beliefs Rationalize the Winner's Curse?: An Experimental Study," Econometrica, Econometric Society, vol. 78(4), pages 1435-1452, July.
    5. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    6. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
    7. Brit Grosskopf & Yoella Bereby-Meyer & Max Bazerman, 2007. "On the Robustness of the Winner’s Curse Phenomenon," Theory and Decision, Springer, vol. 63(4), pages 389-418, December.
    8. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Werner Güth & Kerstin Pull & Manfred Stadler & Alexandra K. Zaby, 2017. "Blindfolded vs. Informed Ultimatum Bargaining – A Theoretical and Experimental Analysis," German Economic Review, Verein für Socialpolitik, vol. 18(4), pages 444-467, November.
    2. Werner Güth & Kerstin Pull & Manfred Stadler & Alexandra K. Zaby, 2019. "Compulsory Disclosure of Private Information: Theoretical and Experimental Results for the Acquiring-a-Company Game," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 175(3), pages 502-523.
    3. Hammond, Robert G. & Morrill, Thayer, 2016. "Personality traits and bidding behavior in competing auctions," Journal of Economic Psychology, Elsevier, vol. 57(C), pages 39-55.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Koch, Christian & Penczynski, Stefan P., 2018. "The winner's curse: Conditional reasoning and belief formation," Journal of Economic Theory, Elsevier, vol. 174(C), pages 57-102.
    2. Moser, Johannes, 2018. "Hypothetical thinking and the winner's curse: An experimental investigation," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181506, Verein für Socialpolitik / German Economic Association.
    3. Nobuyuki Hanaki & Nicolas Jacquemet & Stéphane Luchini & Adam Zylbersztejn, 2016. "Cognitive ability and the effect of strategic uncertainty," Theory and Decision, Springer, vol. 81(1), pages 101-121, June.
    4. David J. Cooper & Matthias Sutter, 2011. "Role selection and team performance," Working Papers 2011-14, Faculty of Economics and Statistics, University of Innsbruck.
    5. 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 207-236, February.
    6. David Danz & Dietmar Fehr & Dorothea Kübler, 2012. "Information and beliefs in a repeated normal-form game," Experimental Economics, Springer;Economic Science Association, vol. 15(4), pages 622-640, December.
    7. Nadine Chlaß & Werner Güth & Christoph Vanberg, 2007. "Social Learning of Efficiency Enhancing Trade With(out) Market Entry Costs - An experimental study," Papers on Strategic Interaction 2006-36, Max Planck Institute of Economics, Strategic Interaction Group.
    8. Farjam, Mike & Kirchkamp, Oliver, 2018. "Bubbles in hybrid markets: How expectations about algorithmic trading affect human trading," Journal of Economic Behavior & Organization, Elsevier, vol. 146(C), pages 248-269.
    9. Sutter, Matthias & Czermak, Simon & Feri, Francesco, 2010. "Strategic Sophistication of Individuals and Teams in Experimental Normal-Form Games," Working Papers in Economics 430, University of Gothenburg, Department of Economics.
    10. Johannes Moser, 2017. "Hypothetical thinking and the winner's curse: An experimental investigation," Working Papers 176, Bavarian Graduate Program in Economics (BGPE).
    11. Moser, Johannes, 2017. "Hypothetical thinking and the winner's curse: An experimental investigation," University of Regensburg Working Papers in Business, Economics and Management Information Systems 36304, University of Regensburg, Department of Economics.
    12. Uwe Dulleck & Rudolf Kerschbamer & Matthias Sutter, 2009. "The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition," Working Papers 2009-03, Faculty of Economics and Statistics, University of Innsbruck.
    13. Johannes Moser, 2019. "Hypothetical thinking and the winner’s curse: an experimental investigation," Theory and Decision, Springer, vol. 87(1), pages 17-56, July.
    14. repec:pit:wpaper:384 is not listed on IDEAS
    15. Kittsteiner, Thomas & Ockenfels, Axel & Trhal, Nadja, 2012. "Partnership dissolution mechanisms in the laboratory," Economics Letters, Elsevier, vol. 117(2), pages 394-396.
    16. Nobuyuki Hanaki & Nicolas Jacquemet & Stéphane Luchini & Adam Zylbersztejn, 2016. "Cognitive ability and the effect of strategic uncertainty," Theory and Decision, Springer, vol. 81(1), pages 101-121, June.
    17. Behnk, Sascha & Barreda-Tarrazona, Iván & García-Gallego, Aurora, 2014. "The role of ex post transparency in information transmission—An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 45-64.
    18. repec:pit:wpaper:401 is not listed on IDEAS
    19. Eyal Ert & Stephanie Creary & Max H. Bazerman, 2014. "Cynicism in negotiation: When communication increases buyers' skepticism," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 9(3), pages 191-198, May.
    20. Pigors, Mark & Rockenbach, Bettina, 2016. "The competitive advantage of honesty," European Economic Review, Elsevier, vol. 89(C), pages 407-424.
    21. Brünner, Tobias & Becker, Alice, 2013. "Bidding in common value fair division games," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79810, Verein für Socialpolitik / German Economic Association.
    22. Schneider, Tim & Meub, Lukas & Bizer, Kilian, 2016. "Consumer information in a market for expert services: Experimental evidence," Center for European, Governance and Economic Development Research Discussion Papers 285, University of Goettingen, Department of Economics.

    More about this item

    Keywords

    asymmetric information; winner's curse; personality traits;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:jrp:jrpwrp:2011-027. 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: . General contact details of provider: http://www.wiwiss.uni-jena.de/ .

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Markus Pasche (email available below). General contact details of provider: http://www.wiwiss.uni-jena.de/ .

    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.