Probably worth including that the winner’s curse will also tend to be a feature when the object to be bought is a one time, one customer type setting.
Or would you agree that under your view, the market clearing price of a Walrasian auctioneer the price is also too high in some way? After all, it’s pretty clear from the simple S & D graph that most of the buyers could have, in theory at least and likely in reality if they could directly communicate, bough whatever they bough at a price lower than the market clearing price; S slopes upwards and includes the producers required rate of return.
Probably worth including that the winner’s curse will also tend to be a feature when the object to be bought is a one time, one customer type setting.
I don’t think the winner’s curse is limited to this; e.g., I think if the top five bidders win in an auction for vacation tickets (not knowing the value of the vacation package in advance), the effect still exists. It also doesn’t need to be a one time thing, or a unique good.
Or would you agree that under your view, the market clearing price of a Walrasian auctioneer the price is also too high in some way? After all, it’s pretty clear from the simple S & D graph that most of the buyers could have, in theory at least and likely in reality if they could directly communicate, bough whatever they bough at a price lower than the market clearing price; S slopes upwards and includes the producers required rate of return.
I don’t think the clearing price in such an auction is skewed high (if it were, you could profit in expectation by consistently selling, and this should correct the effect). I do think adverse selection concerns should enter your calculation even when submitting orders to two sided auctions like this one (e.g. any US stock market opening/closing auction), because your orders are still getting filled by the market as a whole, but I agree the dynamic does not have the directional bias of the auction I describe here.
Probably worth including that the winner’s curse will also tend to be a feature when the object to be bought is a one time, one customer type setting.
Or would you agree that under your view, the market clearing price of a Walrasian auctioneer the price is also too high in some way? After all, it’s pretty clear from the simple S & D graph that most of the buyers could have, in theory at least and likely in reality if they could directly communicate, bough whatever they bough at a price lower than the market clearing price; S slopes upwards and includes the producers required rate of return.
I don’t think the winner’s curse is limited to this; e.g., I think if the top five bidders win in an auction for vacation tickets (not knowing the value of the vacation package in advance), the effect still exists. It also doesn’t need to be a one time thing, or a unique good.
I don’t think the clearing price in such an auction is skewed high (if it were, you could profit in expectation by consistently selling, and this should correct the effect). I do think adverse selection concerns should enter your calculation even when submitting orders to two sided auctions like this one (e.g. any US stock market opening/closing auction), because your orders are still getting filled by the market as a whole, but I agree the dynamic does not have the directional bias of the auction I describe here.