Hypothetical thinking and the winner's curse: An experimental investigation

Arbeitspapier

There is evidence that bidders fall prey to the winner's curse because they fail to extract information from hypothetical events - like winning an auction. This paper investigates experimentally whether bidders in a common value auction perform better when the requirements for this cognitive issue - also denoted by contingent reasoning - are relaxed, leaving all other parameters unchanged. The overall pattern of the data suggests that the problem of irrational over- and underbidding can be weakened by giving the subjects ex ante feedback about their bid, but unlike related studies I also find negative effects of additional information.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: BGPE Discussion Paper ; No. 176

Classification and Topics

• Classification: Wirtschaft ; Auctions ; Asymmetric and Private Information; Mechanism Design ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Design of Experiments: Laboratory, Individual
• Subject: Hypothetical thinking ; cursed equilibrium ; winner's curse

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Moser, Johannes
• Event: Veröffentlichung
• (who): Friedrich-Alexander-Universität Erlangen-Nürnberg, Bavarian Graduate Program in Economics (BGPE)
• (where): Nürnberg
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/180155
• Last update: 10.03.2025, 11:44 AM CET