The value of victory: social origins of the winner's curse in common value auctions. / Van den Bos, Wouter; Li, Jian; Lau, Tatiana; Maskin, Eric; Cohen, Jonathan; Montague, P. Read; McClure, Samuel.

In: Judgment and Decision Making, Vol. 3, No. 7, 10.2008, p. 483-492.

Research output: Contribution to journalArticlepeer-review

Published

Standard

The value of victory: social origins of the winner's curse in common value auctions. / Van den Bos, Wouter; Li, Jian; Lau, Tatiana; Maskin, Eric; Cohen, Jonathan; Montague, P. Read; McClure, Samuel.

In: Judgment and Decision Making, Vol. 3, No. 7, 10.2008, p. 483-492.

Research output: Contribution to journalArticlepeer-review

Harvard

Van den Bos, W, Li, J, Lau, T, Maskin, E, Cohen, J, Montague, PR & McClure, S 2008, 'The value of victory: social origins of the winner's curse in common value auctions', Judgment and Decision Making, vol. 3, no. 7, pp. 483-492. <https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2841440/>

APA

Van den Bos, W., Li, J., Lau, T., Maskin, E., Cohen, J., Montague, P. R., & McClure, S. (2008). The value of victory: social origins of the winner's curse in common value auctions. Judgment and Decision Making, 3(7), 483-492. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2841440/

Vancouver

Van den Bos W, Li J, Lau T, Maskin E, Cohen J, Montague PR et al. The value of victory: social origins of the winner's curse in common value auctions. Judgment and Decision Making. 2008 Oct;3(7):483-492.

Author

Van den Bos, Wouter ; Li, Jian ; Lau, Tatiana ; Maskin, Eric ; Cohen, Jonathan ; Montague, P. Read ; McClure, Samuel. / The value of victory: social origins of the winner's curse in common value auctions. In: Judgment and Decision Making. 2008 ; Vol. 3, No. 7. pp. 483-492.

BibTeX

@article{f1d7dd391d81434aa18a52ea5bbe549a,
title = "The value of victory: social origins of the winner's curse in common value auctions",
abstract = "Auctions, normally considered as devices facilitating trade, also provide a way to probe mechanisms governing one's valuation of some good or action. One of the most intriguing phenomena in auction behavior is the winner's curse — the strong tendency of participants to bid more than rational agent theory prescribes, often at a significant loss. The prevailing explanation suggests that humans have limited cognitive abilities that make estimating the correct bid difficult, if not impossible. Using a series of auction structures, we found that bidding approaches rational agent predictions when participants compete against a computer. However, the winner's curse appears when participants compete against other humans, even when cognitive demands for the correct bidding strategy are removed. These results suggest the humans assign significant future value to victories over human but not over computer opponents even though such victories may incur immediate losses, and that this valuation anomaly is the origin of apparently irrational behavior.",
keywords = "Auctions, Bounded Rationality, winner's curse",
author = "{Van den Bos}, Wouter and Jian Li and Tatiana Lau and Eric Maskin and Jonathan Cohen and Montague, {P. Read} and Samuel McClure",
year = "2008",
month = oct,
language = "English",
volume = "3",
pages = "483--492",
journal = "Judgment and Decision Making",
issn = "1930-2975",
publisher = "Society for Judgment and Decision Making",
number = "7",

}

RIS

TY - JOUR

T1 - The value of victory: social origins of the winner's curse in common value auctions

AU - Van den Bos, Wouter

AU - Li, Jian

AU - Lau, Tatiana

AU - Maskin, Eric

AU - Cohen, Jonathan

AU - Montague, P. Read

AU - McClure, Samuel

PY - 2008/10

Y1 - 2008/10

N2 - Auctions, normally considered as devices facilitating trade, also provide a way to probe mechanisms governing one's valuation of some good or action. One of the most intriguing phenomena in auction behavior is the winner's curse — the strong tendency of participants to bid more than rational agent theory prescribes, often at a significant loss. The prevailing explanation suggests that humans have limited cognitive abilities that make estimating the correct bid difficult, if not impossible. Using a series of auction structures, we found that bidding approaches rational agent predictions when participants compete against a computer. However, the winner's curse appears when participants compete against other humans, even when cognitive demands for the correct bidding strategy are removed. These results suggest the humans assign significant future value to victories over human but not over computer opponents even though such victories may incur immediate losses, and that this valuation anomaly is the origin of apparently irrational behavior.

AB - Auctions, normally considered as devices facilitating trade, also provide a way to probe mechanisms governing one's valuation of some good or action. One of the most intriguing phenomena in auction behavior is the winner's curse — the strong tendency of participants to bid more than rational agent theory prescribes, often at a significant loss. The prevailing explanation suggests that humans have limited cognitive abilities that make estimating the correct bid difficult, if not impossible. Using a series of auction structures, we found that bidding approaches rational agent predictions when participants compete against a computer. However, the winner's curse appears when participants compete against other humans, even when cognitive demands for the correct bidding strategy are removed. These results suggest the humans assign significant future value to victories over human but not over computer opponents even though such victories may incur immediate losses, and that this valuation anomaly is the origin of apparently irrational behavior.

KW - Auctions

KW - Bounded Rationality

KW - winner's curse

M3 - Article

VL - 3

SP - 483

EP - 492

JO - Judgment and Decision Making

JF - Judgment and Decision Making

SN - 1930-2975

IS - 7

ER -