The Problem of Winner's Curse Can Be Avoided

question 22

Multiple Choice

The problem of winner's curse can be avoided:

• A)if the scope of uncertainty increases among the bidders.
• B)by increasing the number of bidders.
• C)by increasing the range of actual estimates and bids.
• D)if the buyer bids more aggressively in presence of more rivals.
• E)if the buyer can assess the good's acquisition value by first discounting his/her original estimate.

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Definitions:

Lemons

A term used in economics to describe a product of lower quality that is hard to distinguish from higher quality products before purchase.

Expected Value

The mean of all potential outcomes of a random variable, adjusted according to their individual probabilities of occurrence.

Dipstick

A tool used for measuring the quantity of a liquid in a tank or container, commonly used for checking oil levels in engines.

Sealed-Bid

A bidding process where all bids are submitted confidentially to the auctioneer with no bidder knowing how much others have bid.