Home About us Contact
|
Home About us Contact | ||
|
|
||
Auction
Kinds of Auction Terms modified by Auction Selected AbstractsSWITCHING TO A TEMPORARY CALL AUCTION IN TIMES OF HIGH UNCERTAINTYTHE JOURNAL OF FINANCIAL RESEARCH, Issue 1 2010David Abad Abstract We evaluate a stock-specific circuit breaker implemented in several European stock exchanges, which consists of a short-lived call auction triggered by intraday stock-specific price limits. It differs from U.S. trading halts in that it is short-lived and nondiscretionary, and a trading mechanism (continuous or discrete) is always going. It differs from daily price limits in that trade prices are not restricted once the limit is hit. Intraday price ranges are smaller and adjusted to the recent volatility, so that limit hits are more frequent. We contribute to the debate about circuit breakers by enlarging the span of these mechanisms studied. [source] Viability of Auction-Based Revenue Management in Sequential MarketsDECISION SCIENCES, Issue 2 2005Tim Baker ABSTRACT The Internet is providing an opportunity to revenue management practitioners to exploit the potential of auctions as a new price distribution channel. We develop a stochastic model for a high-level abstraction of a revenue management system (RMS) that allows us to understand the potential of incorporating auctions in revenue management in the presence of forecast errors associated with key parameters. Our abstraction is for an environment where two market segments book in sequence and revenue management approaches consider auctions in none, one, or both segments. Key insights from our robust results are (i) limited auctions are best employed closest to the final sale date, (ii) counterbalancing forecast errors associated with overall traffic intensity and the proportion of customer arrivals in a segment is more important if an auction is adopted in that segment, and (iii) it is critically important not to err on the side of overestimating market willingness to pay. [source] Market Liberalisation, Vertical Integration and Price Behaviour in Tanzania's Coffee AuctionDEVELOPMENT POLICY REVIEW, Issue 2 2001Anna A. Temu Whether market liberalisation can promote agricultural development in Africa depends on how well existing institutions can facilitate trade by private agents. This article assesses the performance of the Tanzania coffee marketing system after liberalisation and the emergence of private, vertically integrated exporters (VIEs). Increasing producer prices, declining marketing margins, and the continued provision of a useful auction for coffee that is delivered by traders who are not VIEs all suggest a degree of success for liberalisation. The presence of VIEs seems to have provided investment to reduce marketing costs, whilst a sufficient number of competing firms has limited non-competitive behaviour in the market for coffee that is traded at the auction by non-VIEs. [source] Multiunit Pay-Your-Bid Auction with One-Dimensional Multiunit Demands*INTERNATIONAL ECONOMIC REVIEW, Issue 3 2003Bernard Lebrun An arbitrary number of units of a good is sold to two bidders through a discriminatory auction. The bidders are homogeneous ex ante and their demand functions are two-step functions that depend on a single parameter. We characterize the symmetric Bayesian equilibrium and prove its existence and uniqueness. We compare this equilibrium with the equilibrium of the multiunit Vickrey auction and with the equilibria of the single-unit first price and second price auctions. We examine the consequences of bundling all units into one package. We study the impacts that variations of the "relative" supply have on the equilibrium, on the bidders' average payoffs per unit, and on the efficiency of the equilibrium allocation. [source] Deciding on the Mode of Negotiation: To Auction or Not to Auction ElectronicallyJOURNAL OF SUPPLY CHAIN MANAGEMENT, Issue 2 2004Lutz Kaufmann SUMMARY Purchasing transactions are increasingly conducted through electronic auctions. Some companies already source 25 percent of their total purchase volume through this electronic mechanism. However, most of these purchasing transactions could, alternatively, be conducted as face-to-face negotiations. This article examines (a) when it is feasible to conduct an electronic auction in purchasing, and (b) under what circumstances it is better to source items through an electronic auction as opposed to sourcing them through face-to-face negotiations. [source] Strange Bids: Bidding Behaviour in the United Kingdom's Third Generation Spectrum Auction,THE ECONOMIC JOURNAL, Issue 505 2005Tilman Börgers This article studies bidding behaviour in the auction of radio spectrum for third generation mobile telephone services which took place in the UK in the Spring of 2000. We show that several companies' bidding behaviour deviates strongly from straightforward bidding with private values. In particular some companies' evaluation of the added advantage of having a large licence rather than a small licence seemed to change dramatically during the auction. No compelling explanation of this phenomenon seems available at this stage. We conclude that it is less well understood than previously believed how spectrum auctions work. [source] Optimisation and the selection of conservation contracts*AUSTRALIAN JOURNAL OF AGRICULTURAL & RESOURCE ECONOMICS, Issue 1 2007Stefan Hajkowicz This paper explores alternative techniques for the selection of conservation contracts under competitive tendering programs. Under these programs, purchasing decisions are often based on the benefits score and cost for proposed projects. The optimisation problem is to maximise the aggregate benefits without exceeding the budget. Because the budget rarely permits all projects to be funded, there is a binary choice problem, known in the operations research published work as a knapsack problem. The decision-maker must choose which projects are funded and which are not. Under some circumstances, the knapsack problem can be unsolvable because computational complexity increases exponentially with the number of projects. This paper explores the use of several decision rules for solving the optimisation problem including the use of advanced meta-heuristics. It is shown that commonly applied techniques for project selection may not be providing the optimal solution. Improved algorithms can increase the environmental programs benefits and staying within budget. The comparison of algorithms is based on real data from the Western Australian Conservation Auction. [source] A Comment on ,Strange Bids: Bidding Behaviour in the United Kingdom's Third Generation Spectrum Auction' by Tilman Borgers and Christian DustmannTHE ECONOMIC JOURNAL, Issue 505 2005Dan Maldoom First page of article [source] Auctioning resources in Grids: model and protocolsCONCURRENCY AND COMPUTATION: PRACTICE & EXPERIENCE, Issue 15 2006D. Grosu Abstract In this paper, we propose and study an auction model for resource management in Grids. We propose and investigate by simulation three types of auction-based resource-allocation protocols: (i) first-price auction protocol; (ii) Vickrey auction protocol; and (iii) double auction protocol. The goal is to find which of these is best suited to the Grid environment from the users' perspective as well as from the resources' perspective. The results showed that when we consider a mix of risk-averse and risk-neutral users, the first-price auction protocol favors resources while the Vickrey auction protocol favors users. On the other hand, the double auction protocol favors both users and resources. Copyright © 2006 John Wiley & Sons, Ltd. [source] Viability of Auction-Based Revenue Management in Sequential MarketsDECISION SCIENCES, Issue 2 2005Tim Baker ABSTRACT The Internet is providing an opportunity to revenue management practitioners to exploit the potential of auctions as a new price distribution channel. We develop a stochastic model for a high-level abstraction of a revenue management system (RMS) that allows us to understand the potential of incorporating auctions in revenue management in the presence of forecast errors associated with key parameters. Our abstraction is for an environment where two market segments book in sequence and revenue management approaches consider auctions in none, one, or both segments. Key insights from our robust results are (i) limited auctions are best employed closest to the final sale date, (ii) counterbalancing forecast errors associated with overall traffic intensity and the proportion of customer arrivals in a segment is more important if an auction is adopted in that segment, and (iii) it is critically important not to err on the side of overestimating market willingness to pay. [source] A Framework for Facilitating Sourcing and Allocation Decisions for Make-to-Order ItemsDECISION SCIENCES, Issue 4 2004Nagesh N. Murthy ABSTRACT This paper provides a fundamental building block to facilitate sourcing and allocation decisions for make-to-order items. We specifically address the buyer's vendor selection problem for make-to-order items where the goal is to minimize sourcing and purchasing costs in the presence of fixed costs, shared capacity constraints, and volume-based discounts for bundles of items. The potential suppliers for make-to-order items provide quotes in the form of single sealed bids or participate in a dynamic auction involving open bids. A solution to our problem can be used to determine winning bids amongst the single sealed bids or winners at each stage of a dynamic auction. Due to the computational complexity of this problem, we develop a heuristic procedure based on Lagrangian relaxation technique to solve the problem. The computational results show that the procedure is effective under a variety of scenarios. The average gap across 2,250 problem instances is 4.65%. [source] Optimal Design of the Online Auction Channel: Analytical, Empirical, and Computational Insights,DECISION SCIENCES, Issue 4 2002Ravi Bapna ABSTRACT The focus of this study is on business-to-consumer (B2C) online auctions made possible by the advent of electronic commerce over an open-source, ubiquitous Internet Protocol (IP) computer network. This work presents an analytical model that characterizes the revenue generation process for a popular B2C online auction, namely, Yankee auctions. Such auctions sell multiple identical units of a good to multiple buyers using an ascending and open auction mechanism. The methodologies used to validate the analytical model range from empirical analysis to simulation. A key contribution of this study is the design of a partitioning scheme of the discrete valuation space of the bidders such that equilibrium points with higher revenue structures become identifiable and feasible. Our analysis indicates that the auctioneers are, most of the time, far away from the optimal choice of key control factors such as the bid increment, resulting in substantial losses in a market with already tight margins. With this in mind, we put forward a portfolio of tools, varying in their level of abstraction and information intensity requirements, which help auctioneers maximize their revenues. [source] Restructuring Uganda's Coffee Industry: Why Going Back to Basics MattersDEVELOPMENT POLICY REVIEW, Issue 4 2006John Baffes After experiencing a boom during the mid-1990s, the performance of Uganda's coffee industry has been disappointing. Most existing analysis sees the sector's problems as quality deterioration, a poor marketing position in the global market, a weak regulatory framework, and poor infrastructure. Recommendations range from setting up a coffee auction to increasing the share of specialty coffees. This article concludes that such advice has been largely inconsistent with the stylised facts of the Uganda coffee industry, and it argues that coffee wilt disease and the effectiveness of the coffee replanting programme are the two key issues on which policymakers and the donor community should focus their activities and allocate their resources. [source] Market Liberalisation, Vertical Integration and Price Behaviour in Tanzania's Coffee AuctionDEVELOPMENT POLICY REVIEW, Issue 2 2001Anna A. Temu Whether market liberalisation can promote agricultural development in Africa depends on how well existing institutions can facilitate trade by private agents. This article assesses the performance of the Tanzania coffee marketing system after liberalisation and the emergence of private, vertically integrated exporters (VIEs). Increasing producer prices, declining marketing margins, and the continued provision of a useful auction for coffee that is delivered by traders who are not VIEs all suggest a degree of success for liberalisation. The presence of VIEs seems to have provided investment to reduce marketing costs, whilst a sufficient number of competing firms has limited non-competitive behaviour in the market for coffee that is traded at the auction by non-VIEs. [source] Package Auctions and ExchangesECONOMETRICA, Issue 4 2007Paul Milgrom We report recent advances concerning the package allocation problem, in which traders seek to buy or sell combinations of goods. The problems are most difficult when some goods are not substitutes. In that case, competitive equilibrium typically fail to exist but the core is non-empty and comprises the competitive solutions. Also in that case, the Vickrey auction fails to select core allocations and yield revenues that are less than competitive. The Ausubel-Milgrom auction generally selects core allocations and, when goods are substitutes, prescribes the Vickrey allocation. We also evaluate the problems and promise of mechanisms for the package exchange problem. [source] Identification of Standard Auction ModelsECONOMETRICA, Issue 6 2002Susan Athey This paper presents new identification results for models of first,price, second,price, ascending (English), and descending (Dutch) auctions. We consider a general specification of the latent demand and information structure, nesting both private values and common values models, and allowing correlated types as well as ex ante asymmetry. We address identification of a series of nested models and derive testable restrictions enabling discrimination between models on the basis of observed data. The simplest model,symmetric independent private values,is nonparametrically identified even if only the transaction price from each auction is observed. For richer models, identification and testable restrictions may be obtained when additional information of one or more of the following types is available: (i) the identity of the winning bidder or other bidders; (ii) one or more bids in addition to the transaction price; (iii) exogenous variation in the number of bidders; (iv) bidder,specific covariates. While many private values (PV) models are nonparametrically identified and testable with commonly available data, identification of common values (CV) models requires stringent assumptions. Nonetheless, the PV model can be tested against the CV alternative, even when neither model is identified. [source] Economic evaluation of demand-side energy storage systems by using a multi-agent-based electricity marketELECTRICAL ENGINEERING IN JAPAN, Issue 3 2009Ken Furusawa Abstract With the wholesale electric power market opened in April 2005, deregulation of the electric power industry in Japan has faced a new competitive environment. In the new environment, Independent Power Producer (IPP), Power Producer and Supplier (PPS), Load Service Entity (LSE), and electric utility can trade electric energy through both bilateral contracts and single-price auction at the electricity market. In general, the market clearing price (MCP) is largely changed by the amount of total load demand in the market. The influence may cause a price spike, and consequently the volatility of MCP will make LSEs and their customers face a risk of higher revenue and cost. DSM is attractive as a means of load leveling, and has an effect on decreasing MCP at peak load period. Introducing Energy Storage systems (ES) is one DSM in order to change demand profile at the customer side. In the case that customers decrease their own demand due to increased MCP, a bidding strategy of generating companies may be changed. As a result, MCP is changed through such complex mechanism. In this paper the authors evaluate MCP by multi-agent. It is considered that customer-side ES has an effect on MCP fluctuation. Through numerical examples, this paper evaluates the influence on MCP by controlling customer-side ES corresponding to variation of MCP. © 2009 Wiley Periodicals, Inc. Electr Eng Jpn, 167(3): 36,45, 2009; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/eej.20658 [source] On the Magnet Effect of Price LimitsEUROPEAN FINANCIAL MANAGEMENT, Issue 5 2007David Abad G1; G14; D44 Abstract The ,magnet' or ,gravitational' effect hypothesis asserts that, when trading halts are rule-based, investors concerned with a likely impediment to trade advance trades in time. This behaviour actually pushes prices further towards the limit. Empirical studies about the magnet effect are scarce, most likely because of the unavailability of data on rule-based halts. In this paper, we use a large database from the Spanish Stock Exchange (SSE), which combines intraday stock specific price limits and short-lived rule-based call auctions to stabilise prices, to test this hypothesis. The SSE is particularly well suited to test the magnet effect hypothesis since trading halts are price-triggered and, therefore, predictable to some extent. Still, the SSE microstructure presents two particularities: (i) a limit-hit triggers an automatic switch to an alternative trading mechanism, a call auction, rather than a pure halt; (ii) the trading halt only lasts 5 minutes. We find that, even when prices are within a very short distance to the price limits, the probability of observing a limit-hit is unexpectedly low. Additionally, prices either initiate reversion (non limit-hit days) or slow down gradually (limit-hit days) as they come near the intraday limits. Finally, the most aggressive traders progressively become more patient as prices approach the limits. Therefore, both the price patterns and the trading behaviour reported near the limits do not agree with the price limits acting as magnetic fields. Consequently, we conclude that the switching mechanism implemented in the SSE does not induce traders to advance their trading programs in time. [source] A Parimutuel Market Microstructure for Contingent ClaimsEUROPEAN FINANCIAL MANAGEMENT, Issue 1 2005Jeffrey Lange G10; G13; G14 Abstract Parimutuel principles are widely used as an alternative to fixed odds gambling in which a bookmaker acts as a dealer by quoting fixed rates of return on specified wagers. A parimutuel game is conducted as a call auction in which odds are allowed to fluctuate during the betting period until the betting period is closed or the auction ,called'. The prices or odds of wagers are set based upon the relative amounts wagered on each risky outcome. In financial microstructure terms, trading under parimutuel principles is characterised by (1) call auction, non-continuous trading; (2) riskless funding of claim payouts using the amounts paid for all of the claims during the auction; (3) special equilibrium pricing conditions requiring the relative prices of contingent claims equal the relative aggregate amounts wagered on such claims; (4) endogenous determination of unique state prices; and (5) higher efficiency. Recently, a number of large investment banks have adopted a parimutuel mechanism for offering contingent claims on various economic indices, such as the US Nonfarm payroll report and Eurozone Harmonised inflation. Our paper shows how the market microstructure incorporating parimutuel principles for contingent claims which allows for notional transactions, limit orders, and bundling of claims across states is constructed. We prove the existence of a unique price equilibrium for such a market and suggest an algorithm for computing the equilibrium. We also suggest that for a broad class of contingent claims, that the parimutuel microstructure recently deployed offers many advantages over the dominant dealer and exchange continuous time mechanisms. [source] A risk-based approach for bidding strategy in an electricity pay-as-bid auctionEUROPEAN TRANSACTIONS ON ELECTRICAL POWER, Issue 1 2009Javad Sadeh Abstract With the reform of electric power industry and the development of electrical energy markets in many countries, it is of significance to develop bidding strategies for generation companies (GenCos). In this environment, one of the most challenging and important tasks for a GenCo is developing effective strategies to optimize hourly offer curve. In this paper, focusing on Iran's electricity market structure, we model the bidding problem from the viewpoint of a GenCo in a pay-as-bid (PAB) auction. Our goal is to present a tool for determining the optimal bidding strategy of a price-taker producer in an electricity PAB auction taking into account the relevant risks. Due to uncertainties in power market, the market-clearing price (MCP) of each hour is assumed to be known as a probability density function (pdf). The optimal solution of bidding problem is obtained analytically based on the classical optimization theory. Also, the analytical solution for a multi-step bid protocol is generalized and the properties of the generalized solution are discussed. A model is developed to consider concept of risk using two different methods. The two proposed methods are then compared and the results interpreted using numerical examples. In addition, the effect of variation of MCP's pdf parameters on supplier's profit is studied. Copyright © 2007 John Wiley & Sons, Ltd. [source] Regulatory reform of the UK gas market: The sase of the storage auctionFISCAL STUDIES, Issue 2 2001David Hawdon Abstract The UK gas industry has undergone major changes since it was privatised in 1986 as a fully integrated monopoly. The most significant of these has occurred not as a result of the privatisation legislation but by the intervention of the ordinary competition authorities in support of an active industry regulator. While price capping continues to be used as the primary instrument for welfare protection against the still substantial monopolistic powers of the incumbent, new competition (which has been positively encouraged) has had the greater impact on prices and choice. Recently, however, the regulator has encouraged the use of auctions for the sale of storage capacity. This paper considers the merits of auctions and makes a tentative evaluation of their effectiveness. Further use of auctions is recommended but reserve prices are considered inappropriate where monopoly power still remains. [source] COMMUNITY GARDENS AND POLITICS OF SCALE IN NEW YORK CITY,GEOGRAPHICAL REVIEW, Issue 2 2003CHRISTOPHER M. SMITH ABSTRACT. New York City community gardens have been the subject of political contestation over the course of their thirty-year existence. In 1999, 114 gardens were slated for public auction and redevelopment. This article examines the controversy over the garden auction as a politics of scale in which garden advocates successively raised the scope of the controversy beyond the scale of individual gardens, and ultimately beyond that of the city. Analysis of this land-use conflict highlights the significance of politics of scale for grassroots organizations within a market-centric, neoliberal economic framework. [source] Parental response to health risk information: experimental results on willingness-to-pay for safer infant milk formulaHEALTH ECONOMICS, Issue 5 2009Isabell Goldberg Abstract Enterobacter sakazakii, a pathogen that can be found in powdered infant milk formula, can cause adverse health effects on infants. Using Vickrey auction, this study examines parents' willingness to pay (WTP) for a quality assurance label on powdered infant milk formula. The influence of ambiguity with the incidence rate information and provision of safe-handling information on WTP are also evaluated using three experimental treatments. Our findings generally imply that parents significantly value a quality assurance label. The mean price premium parents are willing to pay for the safer and quality assurance labelled powdered infant milk formula ranges from 61 to 133 Eurocents per 100 grams (53,116% of the base price per 100 grams) depending on the treatment. While no ambiguity effects are generally found, provision of safe-handling information significantly reduced WTP to 39,69 Eurocents per 100 grams depending on the treatment. Copyright © 2008 John Wiley & Sons, Ltd. [source] Closing call auctions and liquidityACCOUNTING & FINANCE, Issue 4 2005Michael Aitken G14; G15 Abstract The present paper examines the impact of closing call auctions on liquidity. It exploits the natural experiment offered by the introduction of a closing call auction on the Australian Stock Exchange on 10 February 1997. The introduction of the closing call auction is associated with a reduction in trading volume at the close of continuous trading. However, bid-ask spreads during continuous trading are largely unaffected by the introduction of the closing call auction. Therefore, closing call auctions consolidate liquidity at a single point in time without having any adverse effect on the cost of trading. [source] SUBJECTIVE PROBABILITIES IN GAMES: AN APPLICATION TO THE OVERBIDDING PUZZLE,INTERNATIONAL ECONOMIC REVIEW, Issue 4 2009Olivier Armantier This article illustrates how the joint elicitation of subjective probabilities and preferences may help us understand behavior in games. We conduct an experiment to test whether biased probabilistic beliefs may explain overbidding in first-price auctions. The experimental outcomes indicate that subjects underestimate their probability of winning the auction, and indeed overbid. When provided with feedback on the precision of their predictions, subjects learn to make better predictions, and to curb significantly overbidding. The structural estimation of different behavioral models suggests that biased probabilistic beliefs are a driving force behind overbidding, and that risk aversion plays a lesser role than previously believed. [source] Multiunit Pay-Your-Bid Auction with One-Dimensional Multiunit Demands*INTERNATIONAL ECONOMIC REVIEW, Issue 3 2003Bernard Lebrun An arbitrary number of units of a good is sold to two bidders through a discriminatory auction. The bidders are homogeneous ex ante and their demand functions are two-step functions that depend on a single parameter. We characterize the symmetric Bayesian equilibrium and prove its existence and uniqueness. We compare this equilibrium with the equilibrium of the multiunit Vickrey auction and with the equilibria of the single-unit first price and second price auctions. We examine the consequences of bundling all units into one package. We study the impacts that variations of the "relative" supply have on the equilibrium, on the bidders' average payoffs per unit, and on the efficiency of the equilibrium allocation. [source] Risk attitude in lotteries offering real products and monetary outcomesINTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 2 2010Shavit Tal C91; D44; D81 Using two auction mechanisms, the second price auction and the Becker, DeGroot, and Marschak mechanism, we examined individuals' buying and selling bidding patterns in three types of binary lotteries: a lottery offering only real products, a lottery offering only monetary outcomes and mixed lotteries offering both real products and monetary value outcomes. Participants' willingness to pay and willingness to accept for the product lottery suggest risk neutrality. In contrast, participants' bidding prices for the monetary and mixed lotteries suggest risk aversion. These findings suggest that an individual's risk attitude depends upon the type of lottery, perhaps indicating a "product illusion." [source] A combinatorial auction improves school meals in Chile: a case of OR in developing countriesINTERNATIONAL TRANSACTIONS IN OPERATIONAL RESEARCH, Issue 6 2004Rafael Epstein Abstract The Chilean State delivers essential meal services at schools for low-income students. Junta Nacional de Auxilio Escolar y Becas, the institution in charge of covering 1,300,000 children, leases the meal service to private enterprises. We developed an integer linear programming model to assign the meal contracts, in a process known as combinatorial auctions. The resulting model, which is NP-hard, led to significant improvements in efficiency and also contributed to making the process more transparent. The results are apparent in substantial improvements in quality and coverage of the service, and important savings to the country, which are equivalent to feeding 300,000 children in addition. We developed techniques to solve the combinatorial models and also to analyze and compare multiple scenarios to find robust solutions. For the objective function of this problem, we analyzed several options to consider different kinds of social benefits. In this paper, we describe the problem, the methodology and the results. We also present empirical results based on 6 years of experience. Finally, we discuss the relevance and impact of using operations research in these central issues in developing countries. [source] Resource Allocation Auctions within FirmsJOURNAL OF ACCOUNTING RESEARCH, Issue 5 2007STANLEY BAIMAN ABSTRACT There is growing interest in the use of markets within firms. Proponents have noted that markets are a simple and efficient mechanism for allocating resources in economies in which information is dispersed. In contrast to the use of markets in the broader economy, the efficiency of an internal market is determined in large part by the endogenous contractual incentives provided to the participating, privately informed agents. In this paper, we study the optimal design of managerial incentives when resources are allocated by an internal auction market, as well as the efficiency of the resulting resource allocations. We show that the internal auction market can achieve first-best resource allocations and decisions, but only at an excessive cost in compensation payments. We then identify conditions under which the internal auction market and associated optimal incentive contracts achieve the benchmark second-best outcome as determined using a direct revelation mechanism. The advantage of the auction is that it is easier to implement than the direct revelation mechanism. When the internal auction mechanism is unable to achieve second-best, we characterize the factors that determine the magnitude of the shortfall. Overall, our results speak to the robust performance of relatively simple market mechanisms and associated incentive systems in resolving resource allocation problems within firms. [source] Overcoming the winner's curse: an adaptive learning perspectiveJOURNAL OF BEHAVIORAL DECISION MAKING, Issue 1 2008Yoella Bereby-Meyer Abstract The winner's curse phenomenon refers to the fact that the winner in a common value auction, in order to actually win the auction, is likely to have overestimated the item's value and consequently is likely to gain less than expected and may even lose (i.e., it is said to be "cursed"). Past research, using the "Acquiring a company" task has shown that people do not overcome this bias even after they receive extensive feedback. We suggest that the persistence of the winner's curse is due to a combination of two factors: variability in the environment that leads to ambiguous feedback (i.e., choices and outcomes are only partially correlated) and the tendency of decision makers to learn adaptively. We show in an experiment that by reducing the variance in the feedback, performance can be significantly improved. Copyright © 2007 John Wiley & Sons, Ltd. [source] | ||||||||||||||||||||||||||||||||||||||||