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Mind & Society

, Volume 16, Issue 1–2, pp 113–126 | Cite as

The winner’s curse in auctions with losses

  • Matteo Migheli
Article
  • 113 Downloads

Abstract

The winner’s curse in auctions might emerge from asymmetric information and/or from some willingness to pay for winning. This article is based on a sealed-bid common value first price auction, with a net loss for the subject with the second highest bid. The results show the existence of a trade-off between the magnitude of the potential loss and the willingness to pay for the victory. In the context of public procurement these results suggest that companies are willing to overpay small contracts to gain a sort of ‘free advertising’, whereas this is not the case when the contracts are large.

Keywords

Sealed-bid auction Winner’s curse Risk Public procurement 

JEL classification

C91 D44 D81 H57 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2017

Authors and Affiliations

  1. 1.Department of Economics and Statistics “Cognetti de Martiis”University of TorinoTurinItaly
  2. 2.CeRP – Collegio Carlo AlbertoMoncalieriItaly

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