Asked by Amber Urquijo on Sep 24, 2024
Verified
The winners curse is worse when
A) There are fewer bidders
B) Your rivals do not have as much information as you do
C) Your rivals have more information than you do
D) All of the above
Winner's Curse
A phenomenon in auctions where the winner tends to overpay due to incomplete information or overly optimistic valuation of the asset.
Rivals' Information
Data or intelligence about competitors’ strategies, performance, and operations, useful for gaining a competitive advantage in the market.
Fewer Bidders
a situation in auctions or competitive environments where there is a reduced number of participants bidding for the same item or contract.
- Determine the elements that lead to the occurrence of the winner's curse in auctions and strategies for its reduction.
Verified Answer
TG
Taylor Gutierrez1 day ago
Final Answer :
C
Explanation :
The winner's curse occurs when the winning bid exceeds the actual value of the item being auctioned, leading the winner to overpay. This is more likely to happen when bidders have incomplete or asymmetric information, meaning one or more bidders know more about the item's true value than the others. Therefore, when your rivals have more information than you do, the winner's curse is more likely to occur, making choice (C) the best answer.
Learning Objectives
- Determine the elements that lead to the occurrence of the winner's curse in auctions and strategies for its reduction.