The winner's curse is more likely

Question

Quizplus · Accepted Answer

The winner's curse occurs when the winner of an auction overpays relative to the actual value of the good being auctioned. This is more likely when the value of the good is uncertain, as bidders may have different estimates and the winner may end up bidding too high. When the value of the good is common knowledge, bidders are more likely to have similar estimates and the winner is less likely to overpay. The number of bidders and demand for the good may affect the final price, but they are not direct drivers of the winner's curse. The marginal cost of information is not directly related to the winner's curse either.

The Winner's Curse Is More Likely