Faculty of Science, Technology and Medicine
Faculty of Law, Economics and Finance
Faculty of Humanities, Education and Social Sciences
Interdisciplinary Centre for Security, Reliability and Trust
Luxembourg Centre for Systems Biomedicine
Luxembourg Centre for Contemporary and Digital History
Luxembourg Centre for European Law
Luxembourg Centre for Socio-Environmental Systems
The Missing “Loser’s Curse”: Experimental Evidence on Belief-Based Models in Common-Value Auctions
Joint work with Zachary Breig
Abstract
Models based on mistaken beliefs, such as Cursed Equilibrium and Level-k Thinking, are among the leading explanations for the Winner’s Curse observed in common-value auctions. We argue that these models predict a Loser’s Curse in other auctions formats. Using an experiment with a within-subject design, we test for the presence of both curses in common-value uniform-price auctions. At the aggregate level, we find evidence of a strong Winner’s Curse, but no evidence of a Loser’s Curse.
These aggregate findings cast some doubts on the ability of belief-based models to fully explain the
Winner’s Curse by themselves. Indeed, at the individual level, the behavior of most subjects is better described by Joy of Winning and Quantal Response Equilibrium. We also find suggestive evidence of failures of contingent thinking: subjects behave closer to the rational benchmark in a non-strategic task when the relevant contingency is made more salient.
About the speaker
Antonio Rosato is an economist whose research lies at the intersection of microeconomic theory, behavioural economics, and industrial organization. His work studies how psychologically grounded preferences and beliefs—especially reference dependence and loss aversion—shape strategic behaviour in markets. A particular focus is auction theory and market design with non-standard bidders and buyers. He combines theoretical modelling with experimental evidence on bidding behaviour and consumer decision-making. His research has been published in leading journals including the American Economic Review, Management Science, and Theoretical Economics, as well as the Journal of Economic Theory and the RAND Journal of Economics. Recent contributions examine projection and observational learning in markets and auctions, and optimal auction design with expectations-based loss-averse buyers.
Language
English
This is a free seminar. Registration is mandatory
Supported by the Fond National de la Recherche,
Luxembourg (19441346)