Which of the following situations can lead to a winner's curse? ...

[kshipps]

Which of the following situations can lead to a winner's curse?
 a. A bid which is won by multiple bidders but fails to cover the expectations of the seller.
  b. A win which makes a player over-enthusiastic about further gambles.
  c. An overoptimistic bid which helps the bidder to win but fails to cover his costs.
  d. A win which makes the player risk-averse toward future gambles.

Question 2

Firms cannot resemble
 A) incomplete contracts.
  B) democracies.
  C) an organization without externalities.
  D) a benevolent dictator.

[mochi09]

Answer to Question 1

C

Answer to Question 2

B