Imperfect information among the potential bidders of a cable TV franchise results in a final bid that is more than the market value of a franchise.This situation is an example of _____

Question

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The winner's curse occurs when bidders overestimate the value of the item being auctioned and end up paying more than its market value. In this case, imperfect information among potential bidders leads them to bid more, resulting in the winner's curse. A is incorrect because moral hazard refers to the situation where one party takes risks because another party bears the costs of those risks. B is incorrect because an authority relation refers to a situation where an individual or entity has power over another individual or entity. D is incorrect because the tragedy of the commons refers to the depletion of a shared resource due to individuals' self-interest. E is incorrect because adverse selection refers to a situation where one party has more information than the other party in a transaction, leading to an imbalance of power.

Imperfect Information Among the Potential Bidders of a Cable TV