Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jul, 2010, Volume 78, Issue 4

Can Relaxation of Beliefs Rationalize the Winner's Curse?: An Experimental Study

https://doi.org/10.3982/ECTA8112
p. 1435-1452

Asen Ivanov, Dan Levin, Muriel Niederle

We use a second‐price common‐value auction, called the , to experimentally study whether the winner's curse (WC) can be explained by models which retain best‐response behavior but allow for inconsistent beliefs. We compare behavior in a regular version of the maximal game, where the WC can be explained by inconsistent beliefs, to behavior in versions where such explanations are less plausible. We find little evidence of differences in behavior. Overall, our study casts a serious doubt on theories that posit the WC is driven by beliefs.


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Supplement to "Can Relaxation of Beliefs Rationalize the Winner's Curse?: An Experimental Study"

A PDF file with instructions to experimental subjects.