Winner's Curse
When the winner of an auction overpays the expected value of the auction item in order to win the auction outright, leaving the winner, ironically, worse off.
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Origin
Petroleum engineers Edward Capen, Robert Clapp, and William Campbell coined the term in a 1971 article in the Journal of Petroleum Technology. They observed that oil companies suffered unexpectedly low returns in Outer Continental Shelf lease auctions because winning bidders—holding the most optimistic valuations—systematically overpaid. The winner's curse occurs when bidders fail to account for the adverse selection inherent in winning common value auctions.
Updated February 22, 2026