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

<a href="https://embed.stanford.edu/iframe/?url=https%3A%2F%2Fpurl.stanford.edu%2Fjn778vv4661" class="su-underline">Show Content</a>

Abstract/Contents

Abstract: 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

Related item	Title 2010 Firestone Medal for Excellence in Undergraduate Research
Location	https://purl.stanford.edu/jn778vv4661

Use and reproduction: User agrees that, where applicable, content will not be used to identify or to otherwise infringe the privacy or confidentiality rights of individuals. Content distributed via the Stanford Digital Repository may be subject to additional license and use restrictions applied by the depositor.

Preferred Citation: Tu, Peter. (2010). Winner’s Curse and the Competitive Effect: Measuring Competition in the Viatical Settlement Market . Stanford Digital Repository. Available at: https://purl.stanford.edu/jn778vv4661

Stanford University, Department of Economics, Honors Theses

Loading usage metrics...