Winner's Curse in First-Price Auctions
The following procedure is employed in most common value auction experiments. In each auction period, a common value V is chosen from a uniform distribution on [a, b]. Then each bidder is given a private signal S, which is drawn from a uniform distribution on [V-e, V+e]. e is common information. In first-price auctions, the bidder who bids the highest bid b wins the item and earns V-b. Other bidders earn zero profits.
Explanations for the Experimental Results