Which of the following situations can lead to a winner's curse?
A)A bid which is won by multiple bidders but fails to cover the expectations of the seller.
B)A win which makes a player over-enthusiastic about further gambles.
C)An overoptimistic bid which helps the bidder to win but fails to cover his costs.
D)A win which makes the player risk-averse toward future gambles.

Question

Quizplus · Accepted Answer

The winner's curse occurs when a bidder overestimates the value of the auctioned item and ends up winning with a bid higher than the actual value. This can happen when the bidder is overoptimistic about the value of the item and fails to cover their costs, leading to a winner's curse. Options A and B do not fit the definition of the winner's curse, and option D suggests risk aversion, which is different from the concept of the winner's curse.

Which of the Following Situations Can Lead to a Winner's