The winner’s curse in common value auctions: an experimental study on the Brazilian

Abstract

The “winner’s curse��? occurs when winning bidders of auctions systematically bid above the actual value of the objects and thereby systematically incur losses. In order to investigate the incidence of the winner’s curse in Brazil, we conducted an experiment consisting of a series of auctions of a fictitious object. The Risk Neutral Nash Equilibrium model was adopted as the benchmark for the performance observed. The results provided partial support to the occurrence of the winner’s curse. No systematic losses occurred but the financial results in the auctions were significantly inferior to those predicted by the equilibrium model.