Don't overpay to win
Also called Winner's curse, Value and bid.
When many people bid on something uncertain, the winner is often the one who overestimated it.
Estimate what the thing is really worth. If it would be worth about the same to every bidder and nobody knows exactly, shade your bid: winning means you were the most optimistic.
If the value really is personal, as with a house you love for reasons no one else shares, there is no curse from winning; just keep to the price you set.
Why it matters
Winning an auction is good news about the item and bad news about your estimate.
Away from the game
Bidding wars for companies, drilling rights or building contracts, where the prize is worth about the same to every bidder: decide your limit before the bidding starts, and keep to it.
Try it yourself
Ten firms bid for a building contract. The real cost will be the same whichever firm does the work, but nobody knows it yet. Your estimate was the lowest, so you won. What is most likely?
2 questions, a minute or two. Nothing to finish first.
Want more? Practise Value and bid.
Play it out: the Sealed-bid auction lab, about five minutes against bots.
Learn and practise it
- Skill: Value and bid