DP1754 | The Winner's Curse and the Failure of the Law of Demand

Publication Date

30/11/1997

JEL Code(s)

Keyword(s)

Programme Area(s)

Abstract

We usually assume increases in supply, allocation by rationing, and exclusion of potential buyers will never raise prices. But all of these activities raise the expected price in an important set of cases when common-value assets are sold. Furthermore, when we make the assumptions needed to rule out these ?anomalies? when buyers are symmetric, small asymmetries among buyers necessarily cause the anomalies to reappear.