This video explains the Winner’s Curse, which is a concept in game theory and in economics. It is relevant when people bid on something that has an uncertain valuation. This includes the valuation of a company that one might purchase.
There are new bidders at where I buy auctioned items. Newcomers try to win everything, leaving nothing of value to us oldies. Us oldies have an unspoken agreement to keep prices reasonable. What I’m currently doing to exhaust the newbies is bid my max early, and when doing so the newbies outbid. They’ll eventually burn out, and the oldies will be able to win again.
Thanks nice video. Can the reverse explanation also apply? e.g. in a situation that Contractors are bidding to win a construction project in a new industry with many uncertain, a bidder that value risks higher (putting more cost contingency in its estimation) and will end up losing… a ‘Losers Curse’ perse.
And on the flipside, the lowest bidder could undervalue risk, resulting in failure (and winner's curse to both client and contractor), or cheaps out too much (thus the winner's curse again, but only on client side)
