The winner’s curse in auctions might emerge from asymmetric information
and/or from some willingness to pay for winning. This article is based on a
sealed-bid common value first price auction, with a net loss for the subject with the
second highest bid. The results show the existence of a trade-off between the
magnitude of the potential loss and the willingness to pay for the victory. In the
context of public procurement these results suggest that companies are willing to
overpay small contracts to gain a sort of ‘free advertising’, whereas this is not the
case when the contracts are large.

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• The winner’s curse in auctions with losses