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Economics

Common-Value Auctions and the Winner's Curse

Quick fact

In common-value auctions, the winner is statistically more likely to be the one who overestimated the value—a phenomenon so consistent it earned the name 'winner's curse.'

Why this is interesting

Imagine a jar full of coins. Everyone knows the coins are worth the same, but you can't count them. You guess, others guess, and the highest bidder wins the jar. Would you walk away feeling like a winner?