What is the winner's curse?
Curse the winner, even if it sounds like a very negative thing, is actually quite simple to explain and avoid. During the auction there is a curse of the winner. Such auction could be held for one item or for a company or could refer to offers placed to get something like advertising space.
The item on which the offer is stated will have the same value for any person who wins the auction; The auction is therefore often called auction of common value. If a person offers higher than the actual value, he can win the auction, but also provokes the winner of the curse. In other words, more than actual value is true. If a person exceeds the actual value of the item, then won the item but lost financially. If a potentially profitable supply is offered in an initial public offer (IPO), it is difficult to assess whether the Budenakon event increases the value of shares above the purchase price. If the prices or offers for IPO stocks are common, and if the company fails financially well, exportedThe winner's curse is flying. The winning candidate loses if the shares do not earn money because it overestimated the value of the IPO shares.
in any type of auction, even for small items, can be offered. Many eBay candidates have won the auction only to find that the cost of shipping or costs that they pay for the item exceeds its value. They both win and lose.
Even in silent auctions or standard auctions, the winner's curse can occur when people can pay much more to "win" something in financial loss. For some people it is not necessarily a loss. If there is auction to get money for a reputable charity, the overpayment is compensated by the fact that the person Jeanefit and charity. It's like a situation-winning situation. Caritas will win, win auction, but you lose slightly because you paid more than the actual value of the item. This is quite common thatnames When the offer becomes a competitive AI When people offer, they are aware of the value of the item.
You can avoid the winner curse by having an offer for any item or thing within your known value. It is important to stay calm while offering and be careful not only to win the auction, but also without losing money in this process. It can be more difficult than people think, because "victory" can become the first goal instead of getting a good business.