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Some Evidence of the Winner's Curse

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  • Thiel, Stuart E

Abstract

The mathematical complexity of auction theory has restricted empirical work to qualitative tests of its basic predictions, with mixed results. This paper exploits the theory of order statistics to derive a Nash bid function that is linear in its parameters , allowing direct estimati on by linear least squares. The bid function is fitted to a cross section of auctions for highway construction contracts from thirty-three states, and provides support for several hypotheses of the theory of common-value auctions. Copyright 1988 by American Economic Association.

Suggested Citation

  • Thiel, Stuart E, 1988. "Some Evidence of the Winner's Curse," American Economic Review, American Economic Association, vol. 78(5), pages 884-895, December.
    • Handle: RePEc:aea:aecrev:v:78:y:1988:i:5:p:884-95
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    Citations

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    Cited by:

    1. Susan Athey & Philip A. Haile, 2006. "Empirical Models of Auctions," NBER Working Papers 12126, National Bureau of Economic Research, Inc.
    2. Yusuke Matsuki, 2016. "A Distribution-Free Test of Monotonicity with an Application to Auctions," Working Papers e110, Tokyo Center for Economic Research.
    3. Vukina, Tomislav & Zheng, Xiaoyong & Marra, Michele & Levy, Armando, 2008. "Do farmers value the environment? Evidence from a conservation reserve program auction," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1323-1332, November.
    4. Boeheim, Rene & Zulehner, Christine, 1996. "Auctions - A Survey," Economics Series 39, Institute for Advanced Studies.
    5. Jean-Marc Bourgeon & Y. Le Roux, 1999. "Traders' bidding strategies on EU grain export refunds : an analysis with limited dependent variables," Working Papers hal-02290683, HAL.
    6. Michel Mougeot & Florence Naegelen, 1991. "Malédiction du vainqueur et rationalité économique," Revue Économique, Programme National Persée, vol. 42(1), pages 29-50.
    7. Jean-Jacques Laffont, 1998. "Théorie des jeux et économie empirique : le cas des données issues d'enchères," Économie et Prévision, Programme National Persée, vol. 132(1), pages 121-137.
    8. Sexton, Richard J., 1993. "Noncooperative Game Theory: A Review with Potential Applications to Agricultural Markets," Research Reports 25183, University of Connecticut, Food Marketing Policy Center.
    9. Christopher J. Mayer, 1993. "A model of real estate auctions versus negotiated sales," Working Papers 93-3, Federal Reserve Bank of Boston.
    10. Xiaolong Liu & Weidong Qu, 2015. "Winner's Curse or Signaling? Bidding Outcomes in the Chinese Land Market," International Real Estate Review, Global Social Science Institute, vol. 18(1), pages 113-129.
    11. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
    12. Curt B. Moore & G. Tyge Payne & Igor Filatotchev & Edward J. Zajac, 2019. "The Cost of Status: When Social and Economic Interests Collide," Organization Science, INFORMS, vol. 30(5), pages 869-884, September.
    13. Laffont, Jean-Jacques, 1997. "Game theory and empirical economics: The case of auction data 1," European Economic Review, Elsevier, vol. 41(1), pages 1-35, January.
    14. Leonardo Rezende, 2008. "Econometrics of auctions by least squares," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(7), pages 925-948.
    15. Joel O. Wooten & Joan M. Donohue & Timothy D. Fry & Kathleen M. Whitcomb, 2020. "To Thine Own Self Be True: Asymmetric Information in Procurement Auctions," Production and Operations Management, Production and Operations Management Society, vol. 29(7), pages 1679-1701, July.
    16. Maggie Rong Hu & Adrian D. Lee, 2020. "Outshine to Outbid: Weather-Induced Sentiment and the Housing Market," Management Science, INFORMS, vol. 66(3), pages 1440-1472, March.
    17. Nombela, Gustavo & de Rus, Gines, 2001. "Auctions for Infrastructure Concessions with Demand Uncertainty and Unknown Costs," MPRA Paper 12023, University Library of Munich, Germany.
    18. James V. Koch & Richard J. Cebula, 2002. "Price, Quality, And Service On The Internet: Sense And Nonsense," Contemporary Economic Policy, Western Economic Association International, vol. 20(1), pages 25-37, January.
    19. Harriet Toto Olita & Md. Sayed Iftekhar & Steven G. M. Schilizzi, 2023. "Optimizing contract allocation for risky conservation tenders," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 25(1), pages 63-85, January.
    20. Boone, Audra L. & Harold Mulherin, J., 2008. "Do auctions induce a winner's curse? New evidence from the corporate takeover market," Journal of Financial Economics, Elsevier, vol. 89(1), pages 1-19, July.
    21. Chang N. Xuan & Daniel C. Quan, 2002. "Pricing Limited Partnerships in the Secondary Market," Journal of Real Estate Research, American Real Estate Society, vol. 23(3), pages 215-234.

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