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winner’s curse
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winner’s curse

business
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The "winner's curse" in business refers to a situation in auctions where a bidder, in their eagerness to win, overpays for an item. This happens when a bidder's estimate of an item's value is higher than its actual common value, leading them to unknowingly pay more than it's worth.1

Economists like Robert B. Wilson have studied auction theory, noting that bidders in common-value auctions may bid lower than their perceived value to avoid this curse. If some bidders have more information than others, those with less information may bid even lower or withdraw from the auction altogether. This phenomenon can lead to lower final prices than if all bidders had perfect information about the item's value.1

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2 Britannica Sources
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  2. Robert B. Wilson

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