The publisher that paid Arthur Arthur, the popular novelist, a $2 million advance on his recent novel, which sold only 42 copies, fell victim to

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The situation where the publisher paid a large advance but only 42 copies of the book were sold is an example of the winner's curse. This occurs when a buyer overestimates the value of an item they are bidding on and ends up paying too much for it. In this case, the publisher likely overestimated the popularity of the novel and paid a large advance, but the book did not sell well. This is not an example of moral hazard, an authority relation, the principal-agent problem, or adverse selection.

The Publisher That Paid Arthur Arthur, the Popular Novelist, a $2