The Origin of the Winner's Curse: A Laboratory Study
The Winner's Curse (WC) is a robust and persistent deviation from theoretical predictions established in experimental economics and claimed to exist in field environments. Recent attempts to reconcile such deviation include "cursed equilibrium" and level-k reasoning. We design and imp...
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| Veröffentlicht in: | American economic journal. Microeconomics 2009-02, Vol.1 (1), p.207-236 |
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| container_title | American economic journal. Microeconomics |
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| creator | Charness, Gary Levin, Dan |
| description | The Winner's Curse (WC) is a robust and persistent deviation from theoretical predictions established in experimental economics and claimed to exist in field environments. Recent attempts to reconcile such deviation include "cursed equilibrium" and level-k reasoning. We design and implement a simplified version of the Acquiring-a-Company game that transformed the game to an individual-choice problem that still retains the adverse-selection problem. We further simplified the problem so that simple ordinal reasoning could replace both Bayesian updating and contingent thinking. Our results suggest that the WC reflects bounded rationality in that people have difficulties performing contingent reasoning on future events. |
| doi_str_mv | 10.1257/mic.1.1.207 |
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| ispartof | American economic journal. Microeconomics, 2009-02, Vol.1 (1), p.207-236 |
| issn | 1945-7669 1945-7685 |
| language | eng |
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| source | Jstor Complete Legacy; American Economic Association Web |
| subjects | Auctions Bidding Bids Decision making Economic value Economics Equilibrium Expected values Game theory Games Laboratories Learning Lotteries Microeconomics Modeling Rationality Reason Reasoning Studies Zero |
| title | The Origin of the Winner's Curse: A Laboratory Study |
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