Winner's curse
Several bidders independently estimate a jar's unknown common value, and the highest bidder wins. Why do naive bidders lose money, and how should you bid?
Show hints (2)+
- Condition on the event that you win.
- Winning is bad news about your estimate.
Answer
This is an open-ended question - work through it and compare your reasoning.
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Asked at: Timed Mental-Math & Sequences, Mixed Quant & Coding