Herding and the Winner's Curse in Markets with Sequential Bids

Zvika Neeman, Gerhard O. Orosel

Research output: Contribution to journalArticlepeer-review


We present a model of social learning in an environment with common values where informational cascades and herding arise in combination with the winner's curse. A seller of an object sequentially obtains bids from potential buyers. We characterize three classes of equilibria that differ widely in their information aggregation properties and in the size of the rent the seller captures from the buyers. We compare the procedure of sequentially soliciting bids from the buyers to conducting an English auction for the object in terms of maximization of seller's revenue and demonstrate the superiority of the former.Journal of Economic LiteratureClassification Numbers: D82, D83.

Original languageEnglish
Pages (from-to)91-121
Number of pages31
JournalJournal of Economic Theory
Issue number1
StatePublished - Mar 1999
Externally publishedYes


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