Concept explainers
The “winner’s curse” in auction bidding. In auction bidding, the “winner’s curse” is the phenomenon of the winning (or highest) bid price being above the expected value of the item being auctioned. The Review of Economics and Statistics (Aug. 2001) published a study on whether bid experience impacts the likelihood of the winner s curse occurring. Two groups of bidders in a sealed-bid auction were compared: (1) super-experienced bidders and (2) less-experienced bidders. In the super-experienced group, 29 of 189 winning bids were above the item’s expected value; in the less-experienced group, 32 of 149 winning bids were above the item's expected value.
- a. Find an estimate of p1, the true proportion of super-experienced bidders who fell prey to the winner’s curse.
- b. Find an estimate of p2, the true proportion of less-experienced bidders who fell prey to the winner’s curse.
- c. Construct a 90% confidence interval for p1 − p2
- d. Give a practical interpretation of the confidence interval, part c. Make a statement about whether bid experience impacts the likelihood of the winner s curse occurring.
Want to see the full answer?
Check out a sample textbook solutionChapter 8 Solutions
Statistics Plus New MyLab Statistics with Pearson eText -- Access Card Package (13th Edition)
- MATLAB: An Introduction with ApplicationsStatisticsISBN:9781119256830Author:Amos GilatPublisher:John Wiley & Sons IncProbability and Statistics for Engineering and th...StatisticsISBN:9781305251809Author:Jay L. DevorePublisher:Cengage LearningStatistics for The Behavioral Sciences (MindTap C...StatisticsISBN:9781305504912Author:Frederick J Gravetter, Larry B. WallnauPublisher:Cengage Learning
- Elementary Statistics: Picturing the World (7th E...StatisticsISBN:9780134683416Author:Ron Larson, Betsy FarberPublisher:PEARSONThe Basic Practice of StatisticsStatisticsISBN:9781319042578Author:David S. Moore, William I. Notz, Michael A. FlignerPublisher:W. H. FreemanIntroduction to the Practice of StatisticsStatisticsISBN:9781319013387Author:David S. Moore, George P. McCabe, Bruce A. CraigPublisher:W. H. Freeman