The Winner's Curse and the Failure of the Law of Demand

Jeremy I. Bulow and Paul Klemperer

No 1754, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We usually assume increases in supply, allocation by rationing, and exclusion of potential buyers will never raise prices. But all of these activities raise the expected price in an important set of cases when common-value assets are sold. Furthermore, when we make the assumptions needed to rule out these ‘anomalies’ when buyers are symmetric, small asymmetries among buyers necessarily cause the anomalies to reappear.

Keywords: Airwaves Auction; Auction Theory; Common Value; Initial Public Offering; IPOs; PCS Auction; Spectrum Auction; Winner's Curse (search for similar items in EconPapers)
JEL-codes: D44 G24 G30 L96 (search for similar items in EconPapers)
Date: 1997-11
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Citations: View citations in EconPapers (3)

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