Talk:Winner's curse

Savvy bidders?

Is that the correct term to use? -LeinaD natipaC 12:59, 15 August 2006 (UTC)

• If there's a technical term, I don't know it. The point is that a bidder who understands bidding strategy will adjust for the winner's curse when setting their bid. "Savvy" gets the idea across, I think. Isomorphic 06:43, 23 September 2006 (UTC)

Google IPO

It's worth noting that in the Google IPO, the Winner's curse did not strike--instead the stock doubled within a quarter. I think the model of human behaviour is overly simplistic--which is probably just as well, or no-one would ever buy anything at auction at all! -- anon in August 2005

1. there was not only one good.
2. all bidders underestimated (the stock price at the next possible sale moment)

Tobias Conradi (Talk) 16:58, 18 November 2005 (UTC)

Seen vs. Unseen

I agree that this is a simplistic concept. But this just means that sometimes there will be realities that make the concept inapplicable. It is still useful when additional complexities don't apply to a significant degree...and applicability is always by degrees.

For example. The "Winner's curse" concept focuses on multiple bidders on a single auction item. What if, as is often the case, there is not just one item for auction, but many identical ones for auction? Instead of a winner's curse scenario, what develops are standard supply and demand market equilibria. And remember, the winner's curse is referring to an overpayment relative to market price, not labor cost. Further, every good can be measured in opportunity costs of possibly very different goods. We can therefore state that the winner's curse of auctions is applicable to the degree that multiple bidders consider the particular auction better than the perceived cost of their next best opportunity. Also, good examples of winner's curse involve goods or services intended to be used as capital, expecting a measurable return on investment (ROI), where realized return on investment would be compared to actual ROI where the effect of winner's curse could be measured. If it could apply to objects like celebrity memorabilia, it would be difficult to measure any financial loss created by overpaying for the good.

Unless I get further comments, I may eventually add a version of the above paragraph to the article. Carltonh 20:25, 24 October 2005 (UTC)

Battle of attrition?

Maybe I'm exposing my own ignorance here, but how are winner's curse and battle of attrition related? I mean, I guess they both deal with situations that could be described according to game theory, but is there a better connection I'm not seeing? - JustinWick 21:46, 21 September 2006 (UTC)

Ah, it was War of attrition (game), I disambiguated. - JustinWick 09:21, 7 December 2006 (UTC)

balancing effect

It appears to me that if the resulting prices in auctions were systematically too high, not many people would be interested in buying, but there would be a huge amount of sellers. Thinking about this in terms of demand and supply, would this not drive prices down so that the winner's curse effect is cancelled? Kokkokanta 17:04, 13 January 2007 (UTC)

To be added

One way to systemically avoid Winner's Curse is the Vickrey auction: it is the best system for determining the "real price" of a goods, given sufficient amount of bidders, because then the optimal strategy is to bid "honestly".

See Vicious Strategies for Vickrey Auctions. Felix Brandt, Gerhard Weiß. Technische Universität München. Proceedings of the 5th International Conference on Autonomous Agents. 2001�

-- Sigmundur (talk) 15:08, 26 November 2008 (UTC)

worse off and value

Regarding this edit, the standard notion in auction theory (and lots of economics) is that the bidder has a reservation price for the thing they're bidding for, and that reservation price is based on their expectations of what the characteristics of the thing will be. Frequently, for auctions to businesses, the reservation price is the expected additional profit the item will bring to the business. If the buyer later finds out that the item is not what they expected, their recomputed reservation price for the item may be less than their original reservation price, and even less than they paid for the item. So, yes, the main crux of the winner's curse is that the winner may pay more for an item than it is worth to them. I think the current phrasing is clear, but if you disagree, it might not be clear and could perhaps be changed. CRETOG8(t/c) 16:34, 19 October 2011 (UTC)