The bidder's curse

American Economic Review

Volumn 101, Issue 2, 2011, Pages 749-787

  Malmendier, Ulrike ^a,b   Lee, Young Han ^c  

^a UNIVERSITY OF CALIFORNIA   (United States)

^b NATIONAL BUREAU OF ECONOMIC RESEARCH   (United States)

^c Virtu Financial LLC   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 79955030830     PISSN: 00028282     EISSN: None     Source Type: Journal    
DOI: 10.1257/aer.101.2.749     Document Type: Article

References (70)

1. Ariely, Dan, and Itamar Simonson. 2003. "Buying, Bidding, Playing, or Competing? Value Assessment and Decision Dynamics in Online Auctions." Journal of Consumer Psychology, 13(1-2): 113-23. (Pubitemid 36703991)
2. Ashenfelter, Orley, and David Genesove. 1992. "Testing for Price Anomalies in Real-Estate Auctions." American Economic Review, 82(2): 501-05.
3. Bajari, Patrick, and Ali Hortaçsu. 2003. "The Winner's Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions." RAND Journal of Economics, 34(2): 329-55. (Pubitemid 36931429)
4. Bajari, Patrick, and Ali Hortaçsu. 2004. "Economic Insights from Internet Auctions." Journal of Economic Literature, 42(2): 457-86. (Pubitemid 39223848)
5. Baye, Michael R., John Morgan, and Patrick Scholten. 2004. "Price Dispersion in the Small and in the Large: Evidence from an Internet Price Comparison Site." Journal of Industrial Economics, 52(4): 463-96. (Pubitemid 40005142)
6. Baye, Michael R., John Morgan, and Patrick Scholten. 2006. "Information, Search, and Price Dispersion." In Economics and Information Systems. Handbooks in Information Systems, Vol. 1, ed. Terrence Hendershott, 323-75. Boston: Elsevier.
7. Bernardo, Antonio E., and Bradford Cornell. 1997. "The Valuation of Complex Derivatives by Major Investment Firms: Empirical Evidence." Journal of Finance, 52(2): 785-98.
8. Bernheim, B. Douglas, and Antonio Rangel. 2004. "Addiction and Cue-Triggered Decision Processes." American Economic Review, 94(5): 1558-90. (Pubitemid 40465227)
9. Binmore, Ken, and Paul Klemperer. 2002. "The Biggest Auction Ever: The Sale of the British 3G Telecom Licenses." Economic Journal, 112(478): C74-96. (Pubitemid 34306285)
10. Blecherman, Barry, and Colin F. Camerer. 1996. "Is There a Winner's Curse in the Market for Base-ball Players? Evidence from the Field." California Institute of Technology Social Science Working Paper 966.
11. Brown, Jennifer, and John Morgan. 2006. "Reputation in Online Auctions: The Market for Trust." California Management Review, 49(1): 61-81. (Pubitemid 44917127)
12. Compte, Olivier. 2004. "Prediction Errors and the Winner's Curse." http://www.enpc.fr/ceras/compte/prediction2004.pdf.
13. Cooper, David J., and Hanming Fang. 2008. "Understanding Overbidding in Second Price Auctions: An Experimental Study." Economic Journal, 118(532): 1572-95.
14. Cox, James C., Vernon L. Smith, and James M. Walker. 1988. "Theory and Individual Behavior of First-Price Auctions." Journal of Risk and Uncertainty, 1(1): 61-99.
15. Crawford, Vincent P., and Nagore Iriberri. 2007. "Level-k Auctions: Can a Nonequilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions?" Econometrica, 75(6): 1721-70.
16. Delgado, Mauricio R., Andrew Schotter, Erkut Y. Ozbay, and Elizabeth A. Phelps. 2008. "Understanding Overbidding: Using the Neural Circuitry of Reward to Design Economic Auctions." Science, 321 (5897): 1849-52.
17. Delia Vigna, Stefano, and Ulrike Malmendier. 2004. "Contract Design and Self-Control: Theory and Evidence." Quarterly Journal of Economics, 119(2): 353-402. (Pubitemid 38706643)
18. DeliaVigna, Stefano, and Ulrike Malmendier. 2006. "Paying Not to Go to the Gym." American Economic Review, 96(3): 694-719. (Pubitemid 44273976)
19. Dewan, Sanjeev, and Vernon Hsu. 2004. "Adverse Selection in Electronic Markets: Evidence from Online Stamp Auctions." Journal of Industrial Economics, 52(4): 497-516. (Pubitemid 40005143)
20. Dodonova, Anna, and Yuri Khoroshilov. 2004. "Anchoring and Transaction Utility: Evidence from OnLine Auctions." Applied Economics Letters, 11(5): 307-10. (Pubitemid 38571100)
21. Eliaz, Kfir, Theo Offerman, and Andrew Schotter. 2008. "Creating Competition out of Thin Air: An Experimental Study of Right-to-Choose Auctions." Games and Economic Behavior, 62(2): 383-416.
22. Ellison, Glenn. 2005. "A Model of Add-on Pricing." Quarterly Journal of Economics, 120(2): 585-637. (Pubitemid 40801681)
23. Ellison, Glenn. 2006. "Bounded Rationality in Industrial Organization." In Advances in Economics and Econometrics: Theory and Applications, Ninth World Congress Volume 2. Econometric Society Monographs, No. 42, ed. Richard Blundell, Whitney K. Newey, and Torsten Persson, 142-74. New York: Cambridge University Press.
24. Ellison, Glenn, and Sara Fisher Ellison. 2009. "Search, Obfuscation, and Price Elasticities on the Internet." Econometrica, 77(2): 427-52.
25. Eyster, Erik, and Matthew Rabin. 2005. "Cursed Equilibrium." Econometrica, 73(5): 1623-72. (Pubitemid 41602767)
26. Gabaix, Xavier, and David Laibson. 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets." Quarterly Journal of Economics, 121(2): 505-40. (Pubitemid 43668213)
27. Garratt, Rod, Mark Walker, and John Wooders. 2004. "Behavior in Second-Price Auctions by Highly Experienced eBay Buyers and Sellers." University of California Santa Barbara Economics Working Paper 02-04.
28. Goeree, Jacob K., Charles A. Holt, and Thomas R. Palfrey. 2002. "Quantal Response Equilibrium and Overbidding in Private-Value Auctions." Journal of Economic Theory, 104(1): 247-72.
29. Halcoussis, Dennis, and Timothy Mathews. 2007. "eBay Auctions for Third Eye Blind Concert Tickets." Journal of Cultural Economics, 31(1): 65-78.
30. Heidhues, Paul, and Botond Koszegi. 2005. "The Impact of Consumer Loss Aversion on Pricing." Center for Economic and Policy Research Discussion Paper 4849.
31. Heyman, James E., Yesim Orhun, and Dan Ariely. 2004. "Auction Fever: The Effect of Opponents and Quasi-Endowment on Product Valuations." Journal of Interactive Marketing, 18(4): 7-21. (Pubitemid 39443356)
32. Hirshleifer, David, and Siew Hong Teoh. 2003. "Limited Attention, Information Disclosure, and Financial Reporting." Journal of Accounting and Economics, 36(1-3): 337-86. (Pubitemid 38161324)
33. Hossain, Tanjim, and John Morgan. 2006. "⋯Plus Shipping and Handling: Revenue (Non) Equivalence in Field Experiments on eBay." B.E. Journal of Economic Analysis and Policy: Advances in Economic Analysis and Policy, 6(2): 1-27.
34. Houser, Daniel, and John Wooders. 2006. "Reputation in Auctions: Theory, and Evidence from eBay." Journal of Economics and Management Strategy, 15(2): 353-69. (Pubitemid 43658888)
35. Jagannathan, Ravi, and Ann E. Sherman. 2006. "Why Do IPO Auctions Fail?" National Bureau of Economic Research Working Paper 12151.
36. Jin, Ginger Zhe, and Andrew Kato. 2006. "Price, Quality, and Reputation: Evidence from an Online Field Experiment." RAND Journal of Economics, 37(4): 983-1005.
37. Kagel, John H., and Dan Levin. 1986. "The Winner's Curse and Public Information in Common Value Auctions." American Economic Review, 76(5): 894-920.
38. Kagel, John H., and Dan Levin. 1993. "Independent Private Value Auctions: Bidder Behaviour in First-, Second- and Third-Price Auctions with Varying Numbers of Bidders." Economic Journal, 103(419): 868-79.
39. Kagel, John H., and Dan Levin. 2002. Common Value Auctions and the Winner's Curse. Princeton, NJ: Princeton University Press.
40. Kagel, John H., and Dan Levin. 2009. "Implementing Efficient Multi-Object Auction Institutions: An Experimental Study of the Performance of Boundedly Rational Agents." Games and Economic Behavior, 66(1): 221-37.
41. Kagel, John H., Ronald M. Harstad, and Dan Levin. 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study." Econometrica, 55(6): 1275-1304.
42. Kirchkamp, Oliver, Eva Poen, and J. Philipp Reiss. 2009. "Outside Options: Another Reason to Choose the First-Price Auction." European Economic Review, 53(2): 153-69.
43. Klemperer, Paul. 2002. "How (Not) to Run Auctions: The European 3G Telecom Auctions." European Economic Review, 46(4-5): 829-45. (Pubitemid 34580830)
44. Ku, Gillian, Deepak Malhotra, and J. Keith Murnighan. 2005. "Towards a Competitive Arousal Model of Decision-Making: A Study of Auction Fever in Live and Internet Auctions." Organizational Behavior and Human Decision Processes, 96(2): 89-103. (Pubitemid 40382337)
45. Lazear, Edward, Ulrike Malmendier, and Roberto Weber. 2009. "Sorting in Experiments with Applications to Social Preferences." National Bureau of Economic Research Working Paper 12041.
46. List, John A. 2003. "Does Market Experience Eliminate Market Anomalies?" Quarterly Journal of Economics, 118(1): 41-71. (Pubitemid 36263881)
47. Lucking-Reiley, David. 2000. "Auctions on the Internet: What's Being Auctioned, and How?" Journal of Industrial Economics, 48(3): 227-52.
48. Malmendier, Ulrike. 2002. Societas Publicanorum: Staatliche Wirtschaftsaktivitäten in den Händen Privater Unternehmer. Cologne, Germany: Verlag Böhlau.
49. Malmendier, Ulrike, Florian Peters, and Enrico Moretti. 2010. "Winning by Losing: Evidence on Overbidding in Mergers." Unpublished.
50. Malmendier, Ulrike, and Adam Szeidl. 2009. "Fishing for Fools." Unpublished.
51. Massey, Cade, and Richard Thaler. 2005. "Overconfidence versus Market Efficiency in the National Football League." National Bureau of Economic Research Working Paper 11270.
52. McAfee, R. Preston, and John McMillan. 1996. "Analyzing the Airwaves Auction." Journal of Economic Perspectives, 10(1): 159-75. (Pubitemid 126418342)
53. McFadden, Daniel. 1978. "Modeling the Choice of Residential Location." In Spatial Interaction Theory and Planning Models: Studies in Regional Science and Urban Economics, ed. Anders Karlqvist, Lars Lundqvist, F. Snickars, and J. Weibull, 75-96. New York: Elsevier.
54. Melnik, Mikhail I., and James Aim. 2002. "Does a Seller's eCommerce Reputation Matter? Evidence from eBay Auctions." Journal of Industrial Economics, 50(3): 337-49.
55. Morgan, John, Ken Steiglitz, and George Reis. 2003. "The Spite Motive and Equilibrium Behavior in Auctions." Contributions to Economic Analysis and Policy, 2(1).
56. Mullainathan, Sendhil. 2002. "A Memory-Based Model of Bounded Rationality." Quarterly Journal of Economics, 117(3): 735-74.
57. Ockenfels, Axel, David H. Reiley, and Abdolkarim Sadrieh. 2006. "Online Auctions." In Economics and Information Systems. Handbooks in Information Systems, Vol. 1, ed. Terrence Hendershott, 571-628. Amsterdam: Elsevier.
58. Oster, Sharon M., and Fiona M. Scott Morton. 2005. "Behavioral Biases Meet the Market: The Case of Magazine Subscription Prices." B.E. Journal of Economic Analysis and Policy: Advances in Economic Analysis and Policy, 5(1): 1-30.
59. Pratt, John W., David A. Wise, and Richard Zeckhauser. 1979. "Price Differences in Almost Competitive Markets." Quarterly Journal of Economics, 93(2): 189-211.
60. Resnick, Paul, and Richard Zeckhauser. 2002. "Trust among Strangers in Internet Transactions: Empirical Analysis of eBay's Reputation System." In The Economics of the Internet and E-Commerce. Advances in Applied Microeconomics, Vol. 11, ed. Michael R. Baye, 127-57. New York: Elsevier Science.
61. Ritter, Jay R. 1991. "The Long-Run Performance of Initial Public Offerings." Journal of Finance, 46(1): 3-27.
62. Roth, Alvin E., and Axel Ockenfels. 2002. "Last-Minute Bidding and the Rules for Ending Second- Price Auctions: Evidence from eBay and Amazon Auctions on the Internet." American Economic Review, 92(4): 1093-1103.
63. Shunda, Nicholas. 2009. "Auctions with a Buy Price: The Case of Reference-Dependent Preferences." Games and Economic Behavior, 67(2): 645-64.
64. Simonsohn, Uri, and Dan Ariely. 2008. "When Rational Sellers Face Nonrational Buyers: Evidence from Herding on eBay." Management Science, 54(9): 1624-37.
65. Standifird, Stephen S., Matthew R. Roelofs, and Yvonne Durham. 2004. "The Impact of eBay's Buy-It-Now Function on Bidder Behavior." International Journal of Electronic Commerce, 9(2): 167-76. (Pubitemid 40335280)
66. Staw, Barry M. 1976. "Knee-Deep in the Big Muddy: A Study of Escalating Commitment to a Chosen Course of Action." Organizational Behavior and Human Performance, 16(1): 27-44.
67. Stoll, Hans R., and Anthony J. Curley. 1970. "Small Business and the New Issues Market for Equities." Journal of Financial and Quantitative Analysis, 5(3): 309-22.
68. Vickrey, William. 1961. "Counterspeculation, Auctions, and Competitive Sealed Tenders." Journal of Finance, 16(1): 8-37.
69. Wolf, James R., Hal R. Arkes, and Waleed A. Muhanna. 2005. "Is Overbidding in Online Auctions the Result of a Pseudo-Endowment Effect?" http://fisher.osu.edu/~muhanna-1/pdf/Overbidding-WP07.pdf.
70. Wolf, James R., Hal R. Arkes, and Waleed A. Muhanna. 2006. "Do Auction Bidders 'Really' Want to Win the Item, or Do They Simply Want to Win?" http://fisher.osu.edu/~muhanna-1/pdf/Dopercent20AuctionWin-jcr07.pdf.