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Started by Kwame Darko (@kwame_d) ·

if you won the auction you probably overpaid

5 sources · 29 min down the hole

How I got here

Started with
Why do auction winners so often regret it?
Ended at
Richard Thaler

The Trail

  1. “winner's curse oil lease” (google.com)
  2. Winner's curse (en.wikipedia.org)
  3. Common value auction (en.wikipedia.org)
  4. “bazerman samuelson jar of coins auction” (google.com)

    MBA students bidding on a jar of coins. the winners lost money on average

  5. Richard Thaler (en.wikipedia.org)

What I came away with

When something is worth the same to everyone (like the oil under a lease) but everyone estimates it with noise, the winner tends to be whoever overestimated most. Oil company engineers wrote this up in 1971 after bidding on Gulf of Mexico leases. In classroom auctions of jars of coins, the average bid is too low but the winning bid is too high.

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