Winner’s Curse and the Competitive Effect: Measuring Competition in the Viatical Settlement Market

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This paper attempts to develop a methodology for measuring competition in markets where the object for sale has a common but unknown monetary value. We do this by conceptualizing transactions in the viatical settlement market as first-price, common value auctions and deriving a parametric model for equilibrium bid functions. Within this model, we then estimate parameters and make observations about bidder behavior. Our analysis finds on average, fewer than five bidders compete for viatical contracts. We believe this is strong evidence of market power. Finally, by simulating comparative statics on the distribution of number of bidders, we conclude that at our estimated levels of competition, any evidence of winner’s curse was completely dominated by the competitive effect.


Type of resource text
Date created May 2010


Author Tu, Peter
Primary advisor Bhattacharya, Jayanta
Degree granting institution Stanford University, Department of Economics


Subject Stanford Department of Economics
Subject winner’s curse
Subject viatical settlement
Subject competitive effect
Subject common value auction
Subject life insurance
Genre Thesis

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Tu, Peter. (2010). Winner’s Curse and the Competitive Effect: Measuring Competition in the Viatical Settlement Market . Stanford Digital Repository. Available at:


Stanford University, Department of Economics, Honors Theses

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