Asked by Chase Townsend on Sep 24, 2024
Verified
This factor contributes to the winner's curse
A) your estimate of the value of the object was not the most optimistic
B) your bid was not the highest
C) there were many other bidders that you beat out
D) you shaded your bid too much
Winner's Curse
A phenomenon that occurs in common value auctions, where the winner tends to overpay due to overly optimistic estimation of the asset's value.
Optimistic Estimate
A projection or forecast that assumes the most favorable conditions and outcomes.
Bid Shading
The strategy of making a bid lower than what a bidder is actually willing to pay, typically to save money in auctions or competitive tender processes.
- Recognize factors that cause the winner's curse in auctions and tactics to alleviate it.
Verified Answer
MB
Mickail Boxtonabout 6 hours ago
Final Answer :
C
Explanation :
The winner's curse refers to the phenomenon where the winner of an auction tends to overpay due to the nature of competitive bidding, especially in common value auctions where the item's value is the same for all but unknown at the time of bidding. Winning often means having the highest estimate of the value, which can lead to paying more than the item's actual worth. This is particularly likely when there are many other bidders, as beating out a large number of competitors increases the chance that your bid was based on an overly optimistic valuation.
Learning Objectives
- Recognize factors that cause the winner's curse in auctions and tactics to alleviate it.