Dauphine

Creating a Winner’s Curse via Jump Bids

La Chaire Recherche

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Auteur(s) David ETTINGER
Type de publication Working paper
Référence

GovReg Working Paper series | Issue 2017/02

We show that jump bids can be used by a bidder to create a winner's curse and preserve an informational advantage that would otherwise disappear in the course of an open ascending auction. The effect of the winner's curse is to create allocative distortions and reduce the seller's expected revenue. Two novel features of equilibrium jump bids are
derived. First, the jump bid may fail to hide completely the value of the common value component. Second, a bidder with a higher type might jump bid less frequently than a bidder with a lower type.

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