Hypothetical thinking and the winner's curse: An experimental investigation

Johannes Moser

University of Regensburg Working Papers in Business, Economics and Management Information Systems from University of Regensburg, Department of Economics

Abstract: There is evidence that bidders fall prey to the winner's curse because they fail to extract information from hypothetical events - like winning an auction. This paper investigates experimentally whether bidders in a common value auction perform better when the requirements for this cognitive issue - also denoted by contingent reasoning - are relaxed, leaving all other parameters unchanged. The overall pattern of the data suggests that the problem of irrational over- and underbidding can be weakened by giving the subjects ex ante feedback about their bid, but unlike related studies I also find negative effects of additional information.

Keywords: Hypothetical thinking; cursed equilibrium; winner's curse (search for similar items in EconPapers)
JEL-codes: C91 D03 D44 D82 D83 (search for similar items in EconPapers)
Date: 2017-11-03
New Economics Papers: this item is included in nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://epub.uni-regensburg.de/36304/1/WP_winners_curse.pdf (application/pdf)
https://epub.uni-regensburg.de/36304/7/WP_moser_hyp.pdf (application/pdf)
https://epub.uni-regensburg.de/36304/18/HYP_WC_moser.pdf (application/pdf)
https://epub.uni-regensburg.de/36304/24/HYP_WC_moser.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bay:rdwiwi:36304

Access Statistics for this paper

More papers in University of Regensburg Working Papers in Business, Economics and Management Information Systems from University of Regensburg, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Gernot Deinzer (gernot.deinzer@bibliothek.uni-regensburg.de).