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Journal Article
The Loser's Curse and Information Aggregation in Common Value Auctions
Econometrica
Author(s)
We consider an auction in which k identical objects of unknown value are auctioned
off to n bidders. The k highest bidders get an object and pay the k + 1st bid. Bidders
receive a signal that provides information about the value of the object. We characterize
the unique symmetric equilibrium of this auction. We then consider a sequence of
auctions Ar with nr bidders and kr objects. We show that price converges in probability
to the true value of the object if and only if both kr ? ? and nr - kr ? ?, i.e., both the
number of objects and the number of bidders who do not receive an object go to infinity.
Date Published:
1997
Citations:
Swinkels, Jeroen, Wolfgang Pesendorfer. 1997. The Loser's Curse and Information Aggregation in Common Value Auctions. Econometrica. 1247-1282.