This factor contributes to the winner's curse a. your estimate of the value of the object was not the most optimistic b. your bid was not the highest c. there were many other bidders that you beat out d. you shaded your bid too much
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Your estimate of the value of the object was not the most optimistic - This could potentially contribute to the winner's curse, as you may have underestimated the value of the object and therefore bid too low. However, this is not the primary factor that Show more…
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In auction bidding, the "winner's curse" is the phenomenon of the winning (or highest) bid price being above the expected value of the item being auctioned. A study was conducted to see if less-experienced bidders were more likely to be impacted by the curse than super-experienced bidders. The study showed that of the 185 bids by super-experienced bidders, 26 winning bids were above the item's expected value, and of the bids by the 138 less-experienced bidders, 37 winning bids were above the item's expected value. Complete parts a through d. a. Find an estimate of p1, the true proportion of super-experienced bidders who fall prey to the winner's curse. p1 = .141 b. Find an estimate of p2, the true proportion of less-experienced bidders who fall prey to the winner's curse. p2 = .268 c. Construct a 90% confidence interval for (p1 - p2).
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Suppose we are interested in bidding on a piece of land, and we know that one other bidder is interested. The seller announced that the highest bid in excess of $10,000 will be accepted. Assume that the competitor's bid x is a random variable that is uniformly distributed between $10,000 and $15,000. a. Suppose you bid $12,000. What is the probability that your bid will be accepted? b. Suppose you bid $14,000. What is the probability that your bid will be accepted? c. What amount should you bid to maximize the probability that you get the property? d. Suppose you know someone who is willing to pay you $16,000 for the property. Would you consider bidding less than the amount in part (c)? Why or why not?
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