The winner's curse : paradoxes and anomalies of economic life

Winner of the Nobel Memorial Prize in Economic Sciences Richard Thaler challenges the received economic wisdom by revealing many of the paradoxes that abound even in the most painstakingly constructed transactions. He presents literate, challenging, and often funny examples of such anomalies as why the winners at auctions are often the real losers—they pay too much and suffer the "winner's curse"—why gamblers bet on long shots at the end of a losing day, why shoppers will save on one appliance only to pass up the identical savings on another, and why sports fans who wouldn't pay more than $200 for a Super Bowl ticket wouldn't sell one they own for less than $400. He also demonstrates that markets do not always operate with the traplike efficiency we impute to them. Richard Thaler challenges the received economic wisdom by revealing many of the paradoxes that abound even in the most painstakingly constructed transactions. He presents literate, challenging, and often funny examples of such anomalies as why the winners at auctions are often the real losers - they pay too much and suffer the "winner's curse" - why gamblers bet on long shots at the end of a losing day, why shoppers will save on one appliance only to pass up the identical savings on another, and why sports fans who wouldn't pay more than $200 for a Super Bowl ticket wouldn't sell one they own for less than $400. He also demonstrates that markets do not always operate with the traplike efficiency we impute to them. Thaler argues that recognizing these sometimes topsy-turvy facts of economic behavior will compel economists, as well as those of us who live by their lights in our jobs and organizations, to adopt a more balanced view of human nature, one reflected in Adam Smith's professed belief that, despite our selfishness, there is something in our nature that prompts us to enjoy, even promote, the happiness of others. Cooperation (with Robyn M. Dawes) -- The Ultimatum Game -- Interindustry Wage Differentials -- The Winners's Curse -- The Endowment Effect, Loss Aversion, And Status Quo Bias (with Daniel Kahneman And Jack L. Knetsch) -- Preference Reversals (with Amos Tversky) -- Intertemporal Choice (with George Loewenstein) -- Savings, Fungibility, And Mental Accounts -- Pari-mutuel Betting Markets (with William T. Ziemba) -- Calendar Effects In The Stock Market -- A Mean Reverting Walk Down Wall Street (with Werner F.m. De Bondt) -- Closed-end Mutual Funds (with Charles M.c. Lee And Andrei Shleifer) -- Foreign Exchange (with Ken A. Froot). Richard H. Thaler. A Russell Sage Foundation Book. Includes Bibliographical References (p. 199-223) And Index. The rationale of economics has come to dominate political and institutional life in recent years. However, many economic assumptions have received only scant study. This book examines the many anomalies that abound in even simple economic transactions.