Consider this method for teaching: The Winners Curse (Thaler 1988). Next time that you find yourself a little short of cash for lunch, try the following experiment in your class. Take a jar and fill it with coins, noting the total value of the coins. Now auction off the jar to your class (offering to pay the winning bidder in bills to control for penny aversion). Chances are very high that the following results will be obtained: (1) the average bid will be significantly less than the value of the coins (bidders are risk averse); (2) the winning bid will exceed the value of the jar. Therefore, you will have money for lunch, and your students will have learned first-hand about the "winner's curse. Explain how you might argue that Aetna's 1996 purchase of the spectacular growth company U.S. Healthcare for $8 billion is an example of The Winner's Curse.

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The Answer of Consider this method for teaching: The Winners Curse (Thaler 1988). Next time that you find yourself a little short of cash for lunch, try the following experiment in your class. Take a jar and fill it with coins, noting the total value of the coins. Now auction off the jar to your class (offering to pay the winning bidder in bills to control for penny aversion). Chances are very high that the following results will be obtained: (1) the average bid will be significantly less than the value of the coins (bidders are risk averse); (2) the winning bid will exceed the value of the jar. Therefore, you will have money for lunch, and your students will have learned first-hand about the "winner's curse. Explain how you might argue that Aetna's 1996 purchase of the spectacular growth company U.S. Healthcare for $8 billion is an example of The Winner's Curse.

Consider This Method for Teaching: the Winners Curse (Thaler 1988)