Asked by America Becerra on Jun 04, 2024
Verified
Winning a common-value auction is
A) An indication that your valuation may have been spot on
B) An indication that your valuation may have been too pessimistic
C) Indicates that your valuation may have been too optimistic
D) None of the above
Valuation
The process of determining the present value of an asset, company, or investment.
Common-value Auction
An auction type where the item for sale is valued equally by all bidders, but the true value is unknown until after the auction ends.
Too Optimistic
Characterizes a perspective or expectation that is overly positive or hopeful, often without sufficient grounding in reality.
- Examine the phenomenon of the winner's curse and its effects within common-value auction scenarios.
Verified Answer
JK
Justin KobashigawaJun 09, 2024
Final Answer :
C
Explanation :
In a common-value auction, if you win, it often means your valuation was higher than everyone else's, which could indicate that you were too optimistic about the value of the item. This is known as the winner's curse.
Learning Objectives
- Examine the phenomenon of the winner's curse and its effects within common-value auction scenarios.