Podcast Summary

Podcast: New Books Network
Episode: Richard H. Thaler and Alex Imas, "The Winner's Curse: Behavioral Economics Anomalies, Then and Now"
Date: November 15, 2025
Host(s): Peter Lorenson and Robizon Kubalashvili
Guest: Alex Imas

Episode Theme

The episode centers on the evolution, impact, and continuing questions of behavioral economics, anchored in the newly updated book The Winner’s Curse: Behavioral Economics Anomalies, Then and Now by Richard Thaler and Alex Imas. The discussion delves into classic behavioral "anomalies," their replicability, and how the field has responded and grown over three decades.

Key Discussion Points & Insights

What is Behavioral Economics?

• Definition & Contrast with Standard Economics
  Behavioral economics examines how real human behavior deviates from the "rational agent" model central to traditional economics.

  • Standard economics relies on rationality axioms; assumes agents don’t make systematic errors.
  • Behavioral economics introduces evidence from psychology showing systematic deviations from rationality (e.g., loss aversion, misjudging probabilities).

    "Behavioral economics is essentially saying like, look, these principles of rationality are very, very appealing from a normative perspective ... But the question is, do people actually behave according to these principles?" — Alex Imas [03:58]

• Key Historical Moment
  The 1979 Kahneman & Tversky paper ("Prospect Theory") is frequently cited as sparking the modern field.

The Backstory and Evolution of The Winner’s Curse Book

• Origins
  Richard Thaler wrote the original columns on "anomalies" for the Journal of Economic Perspectives, aiming to explain surprising deviations from rational choice to a broad academic audience.
• Update Motivation
  The 1992 book fell out of print; Thaler and Imas sought both to update it and address how the field stands after 30 years.
• Major Overhaul
  Rather than simply update, the new edition essentially doubles the content, revisiting every anomaly with 30 years of evidence, adding replications, and discussing whether the field faces a "replication crisis."

  "Part of the book was also replication. We took all of these anomalies and replicated them to make sure they were robust ..." — Alex Imas [06:32]

Deep Dive: The Winner’s Curse Anomaly

• What is the Winner’s Curse?
  • Arises in auctions—winner tends to overpay due to overestimation.
  • Found not in small-scale lab settings but in high-stakes real world (e.g., oil well auctions).
  • The core intuition: the most optimistic (and over-optimistic) bidders win, leading to systematic overpayment.
• Robustness Across Contexts
  The phenomenon persists among professionals and in high-stakes domains, not just among "half-asleep undergrads."

  "If you look at the data sets on the winner’s curse, like from the NFL or something like that, you replicate the winner’s curse year after year after year ... there's some learning, but it's very small. And the winner’s curse is very significant still." — Alex Imas [15:08]

Theoretical Mechanisms and the Cursed Equilibrium

• What’s Being Violated?
  Winner’s curse is not a straightforward violation of expected utility theory but of how people model the strategic thinking of others.
• Cursed Equilibrium
  • People underestimate how strategically others are behaving.
  • Links to the "beauty contest" game, where reasoning typically stops at 1-2 steps rather than infinite recursion predicted by theory.

  "The idea that when I'm interacting in a market, I don't think that other people are bidding strategically against me ... I think that they're ... got a signal of five [dollars]. And the fact that I don't think that I'm interacting with strategic players means that I'm going to be engaging in a way where I overvalue the good." — Alex Imas [19:15]

Teaching Behavioral Economics: Integration or Silo?

• Current Practice

  • Traditional economics education resists integrating behavioral findings; they're often confined to separate chapters or electives.

  "Economics still basically teaches all the purely rational models as the bulk ... and then there's maybe one chapter ... that says, oh, but actually in experiments, maybe something else entirely will happen." — Peter Lorenson [24:37]

• Imas’ Approach

  • Presents standard and behavioral models side by side.
  • Emphasizes running experiments, collecting data, and experimentation as central to understanding behavior.

  "I always present the standard model. You can't do behavioral economics without standard economics. ... But the thing that I really stress, and we stress it in the book as well, is the role of experimentation." — Alex Imas [26:05]

• In-Class Experiments
  Running games and market experiments in class (e.g., beauty contest, ultimatum game, endowment effect) gives students first-hand insight into divergence from traditional predictions.

  "The consistency of the endowment effect is always fascinating, right? ... All of a sudden, their minimum willingness to accept doubles the valuations that buyers submit ... which basically leads to a market breakdown where nobody trades almost." — Alex Imas [32:16]

Behavioral Economics in Broader Fields

• Behavioral Macroeconomics?
  Integration of behavioral insights into fields like macro or trade is limited but growing, especially in finance.

  "In 30 years we may look back and say, like, look, we really could be teaching all of economics as a behavioral economics course ..." — Alex Imas [34:41]

• Finance as Behavioral Economics’ Success Story

  • Behavioral finance has produced robust, applicable models and findings, more so than macro-oriented areas.

Replication Crisis: Economics vs. Psychology

• Behavioral Economics Has Fared Better

  • Experiments in economics have higher replication rates (~70%) versus social psychology (~25%).
  • Reasons:
    • Culture of openness (data and instructions shared).
    • Cumulative model (each new experiment builds on, and thus replicates, prior methods/results).
    • Need to "prove themselves" to a skeptical mainstream led to more stringent standards.

  "The culture of replication was there from the beginning because everybody was trying to replicate these things ... if you know you’re going to face an adversary that's going to try to replicate your experiments, you make sure you’re publishing stuff that replicates." — Alex Imas [46:09]

• Contrast with Social Psychology

  • In psychology, rewards favored novelty and "coolness" over careful replication, leading to fragility in findings (e.g., priming effects).

Notable Quotes & Memorable Moments

• On the purpose of updating the book:

  "We have a very unique opportunity to say, look, there's been 30 years of research in this field. Where is the field now?" — Alex Imas [06:32]

• On classroom astonishment at behavioral results:

  "People's jaws are on the floor thinking, oh my God, economics is this magical thing. And then you tell them, all right, let's do this ... with a public posted price ... all of a sudden things break down." — Alex Imas [29:19]

• On the origins of behavioral findings:

  "If you're a human being, you'd say, of course people get pissed off at getting offered a cent. Why would they accept it? Economists' reaction was that’s crazy. A penny is better than nothing." — Alex Imas on the ultimatum game [46:09]

Timestamps for Key Segments

• Introduction to Behavioral Economics: [03:45–06:24]
• Book Backstory & Structure: [06:24–11:07]
• Explaining the Winner’s Curse: [11:07–15:08]
• Persistence of Anomalies Among Professionals: [15:08–17:13]
• Psychological Mechanisms: Cursed Equilibrium & Beauty Contest: [19:15–24:33]
• Challenges in Teaching Behavioral Economics: [24:37–28:49]
• In-Class Experiments & Teaching Strategies: [29:19–32:16]
• Consistency of Behavioral Effects (Endowment, Ultimatum Game): [32:16–34:41]
• Integration into Broader Fields: [34:41–36:41]
• Replication in Economics vs. Psychology: [42:02–49:03]
• On Scientific Culture & Replication: [49:03–53:01]
• Current & Future Research Directions: [53:21–54:28]

Closing & Further Reading

Imas highlights his ongoing research into digital marketplaces and behavioral market design, signaling the field’s future lies in blending behavioral insights with the realities of digital economies and firm behavior.

Final plug:
“Thanks again to Alex Imas ... the title of the book is The Winner’s Curse, so make sure to get yourself an actual copy and read it. There’s a lot of insight in there.” — Peter Lorenson [54:28]