Heterogeneity and the Winner's Curse

Open Access
Author:
Huwyler, Michael Daniel
Area of Honors:
Economics
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Peter William Newberry, Thesis Supervisor
  • Russell Paul Chuderewicz, Honors Advisor
Keywords:
  • winner's curse
  • auctions
  • heterogeneity
  • eBay
  • Corvette
Abstract:
Auctions provide a unique market structure through which one can analyze consumer behavior and rational decision-making. While many variables can influence an individual’s decision on the amount and timing of a bid, there is perhaps no greater factor than one’s experience. More experienced bidders are able to strategize in order to mitigate poor results, notably the “winner’s curse.” This strategic ability could also be the result of other individual characteristics. For example, socio-economic status can influence one’s bidding strategy. Within the context of an auction setting, this thesis intends to explore the relationship between an individual’s personal background and bidding history in response to perceived negative outcomes.