The Winner's Curse and Public Information in Common Value Auctions

S-Tier
Journal: American Economic Review
Year: 1986
Volume: 76
Issue: 5
Pages: 894-920

Score contribution per author:

4.022 = (α=2.01 / 2 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

In common value auction experiments, individual judgment errors significantly alter market outcomes relative to standard economic formulations. Experienced bidders show sensitivity to the strategic considerations underlying the auction but not to item valuation considerations. Nash equilibrium models accurately characterize auctions with small numbers of bidders_(3-4). However, auctions with large numbers_(6-7) produce more aggressive bidding, resulting in negative profits, the winner's curse. Public informationreducing value uncertainty raises seller's revenues in the absence of a winner's curse, but reduces revenue in its presence. Similarities between laboratory and field data from outer continental shelf lease sales are discussed.

Technical Details

RePEc Handle
repec:aea:aecrev:v:76:y:1986:i:5:p:894-920
Journal Field
General
Author Count
2
Added to Database
2026-01-25