Beware the Winner's Curse

In the roaring 1990s, many companies seemed to claim great victories-acquiring another company, obtaining state-of-the art technology, or hiring a potential CEO savior-only to find that they had made a great mistake. The term "Winner''s Curse" was coined by economists to explain an effect commonly observed in auctions. In such situations, since the winning bidder is usually the most optimistic abo...