People love winning; no matter of what they win, they will
feel of some degree of happiness. In auctions, winning means placing the
highest bid. As long as people are willing to pay for their happiness, they are
willing to pay the amount above their actual rational valuations just in order
to get that extra happiness of win.
Then this leads to a problem that if there exists winner’s
curse in auctions with solely independent private values. It is commonly agreed
that in auctions with common values, there exists winner’s curse, because
people value the objects based on not only their individual values but also others’.
However, if people love to pay for their extra happiness of win, then the
winners will pay the amounts that are above their initial valuations
particularly in English auctions, as their initial evaluations do not consider of
the temporary happiness gained from winning the auctions.
If we can actually find evidence that the winners of
auctions (with merely independent private values) pay the prices that are
higher than their initial evaluations before participating in auctions (this
could be done by surveys asking people’s valuations before their entering auctions
or changing the formats of auctions, people may feel stronger about win in
English auctions than in sealed auctions), we may be able to conclude in any kind of auction there exists winner's curse.
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