Econometrica Vol. 78 No. 4 2010

Can Relaxation of Beliefs Rationalize the Winner's Curse?: An Experimental Study

Asen Ivanov¹; Dan Levin²; Muriel Niederle^3,4

¹ Virginia Commonwealth University · ² The Ohio State University · ³ Girls Incorporated · ⁴ Stanford University

Abstract

We use a second-price common-value auction, called the maximal game, to experimentally study whether the winner's curse (WC) can be explained by models which retain best-response behavior but allow for inconsistent beliefs. We compare behavior in a regular version of the maximal game, where the WC can be explained by inconsistent beliefs, to behavior in versions where such explanations are less plausible. We find little evidence of differences in behavior. Overall, our study casts a serious doubt on theories that posit the WC is driven by beliefs.

DOI

10.3982/ecta8112

Volume

78

Issue

4

Pages

1435-1452

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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