The Agony of Victory

March 19 1999 3:30 AM

The Agony of Victory

Online auctions and the winner's curse.

(Continued from Page 1)

On the other hand, if buyers at online auctions are persistently disappointed, it's possible that after a while they'll stop bidding. It's also possible that experience will lead them to approximate "rationality," and they'll reduce their bids. Either way, sellers would find their inflated profits eroded. But auctions have survived the winner's curse for millenniums, and even the Internet is unlikely to change that.


To be sure, not all auctions are rip-offs. Remember, there is no danger of the winner's curse if you are sure about the value of an item to you. In that situation, the auction device serves its proper purpose of putting the item in the hands of whoever values it the most. For instance, suppose you are buying a Beanie Baby for your little brother or a discounted airline ticket to Cabo San Lucas. Most folks have a pretty clear idea of how much pleasure they'll get from their brother's smiles or a few days of sand and surf. And sane consumers won't bid more than these respective pleasures are worth to them--meaning that they can't feel cheated.

The winner's curse also doesn't apply when there are many identical items being auctioned off. In those cases, where there is enough quantity available to satisfy most bidders, the going price will be set by the sensible middle of the pack rather than by the most overoptimistic extremist. The leading example of such an auction is the stock market. So the winner's curse can't explain the extravagant price of shares in eBay itself. Unless, of course, when it comes to Internet shares there is no sensible middle. If everyone's gone crazy, economic theory isn't much help.



More Than Scottish Pride

Scotland’s referendum isn’t about nationalism. It’s about a system that failed, and a new generation looking to take a chance on itself. 

iOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.

Why Greenland’s “Dark Snow” Should Worry You

Three Talented Actresses in Three Terrible New Shows

The Human Need to Find Connections in Everything

It’s the source of creativity and delusions. It can harm us more than it helps us.


Happy Constitution Day!

Too bad it’s almost certainly unconstitutional.

The Ungodly Horror of Having a Bug Crawl Into Your Ear and Scratch Away at Your Eardrum

My Father Was James Brown. I Watched Him Beat My Mother. Then I Married Someone Like Him.

  News & Politics
Sept. 17 2014 12:02 PM Here It Is: The Flimsiest Campaign Attack Ad of 2014, Which Won’t Stop Running
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
Sept. 17 2014 1:59 PM Ask a Homo: Secret Ally Codes 
  Double X
The XX Factor
Sept. 17 2014 1:26 PM Hey CBS, Rihanna Is Exactly Who I Want to See on My TV Before NFL Games
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
Brow Beat
Sept. 17 2014 1:01 PM A Rare, Very Unusual Interview With Michael Jackson, Animated
Future Tense
Sept. 17 2014 12:35 PM IOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.
  Health & Science
Bad Astronomy
Sept. 17 2014 11:18 AM A Bridge Across the Sky
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.