Pedro Arantes
HomeContactNow

Winner's Curse

The winner's curse is a tendency in which the winner of a bid in an auction pays more than the item's intrinsic value or true worth.
#atlantic-richfield
Zettelkasten, August 22, 2021

Notes

  • The winner's curse is a tendency in which the winner of a bid in an auction pays more than the item's intrinsic value or true worth.

    • The winner makes the enormous overestimation of an item, thus winning the auction.
  • Incomplete information, emotions, and other factors may cause the difference between the paid and intrinsic values.

  • Three Atlantic Richfield engineers coined the term winner's course after observing poor investment returns of companies bidding for offshore oil drilling rights in the Gulf of Mexico.

References

RecommendationsDo you want to see all posts instead?
Network Effects
Newsletter
On Tuesday (not weekly), I publish my most recent readings and thoughts. Subscribe to my newsletter if you want to follow posts about #startups, #product-development, #mental-models, and more.

By subscribing, you agree with Revue’s Terms and Privacy Policy.