[richdougherty]

I haven't read the article, but "The Winner's Curse" is an economics concept I'm familiar with.

Basically, The Big Insight is that every bidder has an estimate of the value of something, and the true value might differ from these estimates. If you're the winner of a transaction then you have likely overestimated the value. Since you had the highest estimate, you probably overestimated.

But it only arises in certain situations. In practice, it depends on whether all bidders have the same information. If you have more information your estimate might be correct. It also depends on whether the item has different value to different bidders, as it might truly be more valuable to the winner.

https://en.wikipedia.org/wiki/Winner%27s_curse

> Savvy bidders will avoid the winner's curse by bid shading, or placing a bid that is below their ex ante estimation of the value of the item for sale—but equal to their ex post belief about the value of the item, given that they win the auction. The key point is that winning the auction is bad news about the value of the item for the winner. It means that he or she was the most optimistic and, if bidders are correct in their estimations on average, that too much was paid. Therefore savvy bidders revise their ex ante estimations downwards to take account of this effect.

[glitchc]

It sounds like they don't win anything either. Ultimately the expected value of the bid devolves into a binary outcome: win or loss. This strategy seems to guarantee a loss as the optimal bid is never the maximum bid, ergo it will never result in a win. What's the point? Might as well not bid at all to achieve the same outcome.