The winner's curse says that:
A) the highest bidder in a competitive auction is likely to realize negative profits.
B) the winner of any lottery is likely to realize negative profits.
C) successful firms often lose their intensity over time.
D) to stay first in its industry, a leader must innovate constantly.
E) firms should strive to be second best.

Question

Quizplus · Accepted Answer

The winner's curse refers to the phenomenon where the highest bidder in a competitive auction tends to overpay and, as a result, realizes negative profits. This is because the highest bidder is likely to place a higher value on the item being auctioned than its actual worth, leading to an inevitable loss.

The Winner's Curse Says That