Cursed Equilibrium Revisited

Empirical as well as experimental evidence strongly suggests that bidders in common value auctions typically do not conform to the requirements of per-fect rationality. Eyster and Rabin (2005) develop a theory and an equilibrium concept -cursed equilibrium for bounded rational bidding in common value auctions (among other situations), and also present some experimental evidence supporting the theory. This paper comments on these \u85ndings of an experiment conducted at the University of Bergen. In the experiment, par-ticipants often demonstrate behaviour that is beyond the bounds set by the -cursed equilibrium theory, and I present an alternative theory that better explains the experimental \u85ndings. JEL classi\u85cation numbers: C91, D44