The Winner’s Curse is the phenomenon where a person who wins an auction might be worse off because they overpaid for the item. It is possible in “common value” auctions - where the item has the same value to everyone, but people bidding are unsure of the value. Because of this, the person with the highest estimate of the value often wins the auction, but they also might be overestimating the value for the item.
This video explores the concept of the Winner's Curse in auctions, focusing on a real estate auction from HGTV's Flip or Flop. This video analyzes a property auction where Tariq and Christina from HGTV's Flip or Flop plan to bid a maximum of $350,000 for a house they intend to flip. They are uncertain of the property's true value. This brings about the possibility of the winner's cure.
Check out the full video below!