Winning selects the most optimistic estimate.
Common-value auctions expose bidders to selection: winning provides information about how optimistic their estimate was. Milgrom and Wilson's work studies auctions with such information problems.
Inside this model
Each estimate is independently uniform between 100−e and 100+e. Every bidder submits max(0, estimate−reduction). The highest bid wins and pays its bid. The plot compares the running mean winning bid with the true value across 1,000 seeded auctions.
Out in the world
A practical use
A company bidding for an uncertain project can win precisely because its cost estimate was the most optimistic.
A useful lens. Not a universal law.
- These bidders use a naive shared rule, not equilibrium bidding. A common reduction can improve a winner's margin here without changing who wins; real competition and seller reserves complicate that trade-off.
Associated thinkers
Further reading
Explore the original research or the teaching reference behind this experiment.
Nobel committee — Milgrom, Wilson and the winner's curse ↗