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Prices and the Winner's Curse

Author

Listed:
  • Jeremy Bulow

    (Federal Trade Commission & Graduate School of Business, Stanford University, USA)

  • Paul Klemperer

    (Nuffield College, Nuffield College, Oxford University, UK)

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 the buyers necessarily cause the anomalies to reappear.

Suggested Citation

  • Jeremy Bulow & Paul Klemperer, 1999. "Prices and the Winner's Curse," Game Theory and Information 9904003, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpga:9904003
    Note: Type of Document - Tex/pdf; prepared on PC; to print on HP/PostScript; pages: 33 ; figures: none. We never published this piece and now we would like to reduce our mailing and xerox cost by posting it.
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    More about this item

    Keywords

    Auction theory; common value; winner's curse; PCS auction; spectrum auction; airwaves auction; initial public offerings; IPO;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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