The winner’s curse: conditional reasoning & belief formation

Christian Koch and Stefan P. Penczynski

No 15-03, Working Papers from University of Mannheim, Department of Economics

Abstract: We investigate the relevance of conditional reasoning and belief formation for the occurrence of the winner’s curse with the help of two experimental manipulations. First, we compare results from a very simple common-value auction game with results from a transformed version of this game that does not require any conditioning on future events. In human opponent settings, we observe significant differences in behavior across the two games. Second, we investigate subjects’ behavior when they face naïve computerized opponents and after they have faced them. We find that both strong and weak assistance in belief formation changes subjects’ play significantly in the auction game. Overall, the results suggest that the difficulty of conditioning on future events is at least as important in explaining frequent occurrences of the winner’s curse as is the challenge to form beliefs.

Keywords: Auctions; Winner’s curse; Conditional Reasoning; Beliefs (search for similar items in EconPapers)
JEL-codes: D44 D81 D82 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-exp, nep-gth and nep-hpe
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://madoc.bib.uni-mannheim.de/37475/1/Koch_und_Penczynski_15-03.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:mnh:wpaper:37475

Access Statistics for this paper

More papers in Working Papers from University of Mannheim, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Katharina Rautenberg ().