Winner’s Curse
The Basic Idea
If you’ve ever been to an auction, you know that it can be a high-pressure, intense, and an exciting experience. As items begin to go up for bid, and people around you begin to raise their paddles, maybe you’ve started to wonder if you too should bid on the item. You might not have intended to bid on the item, but it feels like everyone else recognizes its value. Not wanting to miss out, you and other auctioneers continue to make higher and higher bids. Finally, someone wins the item. They might initially feel like they’ve won and secured the valuable item, but upon further reflection, they will realize they overpaid.
In these emotional and overwhelming situations, it can be difficult to make rational decisions about an item’s value, and people often fall victim to the winner’s curse. The winner’s curse is the tendency for the winning bid to exceed the worth of an item.1 The person who wins the bid overestimates its worth the most, as they were willing to go above and beyond what a presumably rational person is willing to bid. So, the fact that they won means they paid more than the item is actually worth in the market, as they pay more than other people have valued the item at.
The Winner’s Curse is when you come out on top of the bid, but only by paying a steep price.
– New York Times bestselling author Marie Rutkoski, in the first book The Winner’s Curse of her three-part series,The Winner’s Trilogy.2
About the Author
Emilie Rose Jones
Emilie currently works in Marketing & Communications for a non-profit organization based in Toronto, Ontario. She completed her Masters of English Literature at UBC in 2021, where she focused on Indigenous and Canadian Literature. Emilie has a passion for writing and behavioural psychology and is always looking for opportunities to make knowledge more accessible.
