winner's curse

(redirected from Winners' Curse)

Winner's curse

Problem faced by uninformed bidders. For example, in an initial public offering uninformed participants are likely to receive larger allotments of issues that informed participants know are overpriced.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Winner's Curse

In auctions, the tendency for the winning bid to exceed the intrinsic value of what is being offered. This trend was first noted among energy companies during auctions for bidding rights to drill in the Gulf of Mexico. It is thought that insufficient information and, perhaps more so, the emotional desire to win in the heat of an auction contribute to the winner's curse. See also: Behavioral economics.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

winner's curse

The likelihood the winning bidder in an auction of several bidders will pay too high a price. From an investor's standpoint, the winner's curse implies the stockholders of the firm acquired in a merger will benefit at the expense of the stockholders of the acquiring firm when several potential acquirers are involved in the bidding.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

winner's curse

the possibility that the winning bidder in an AUCTION will pay too much for an ASSET since the highest bidder places a higher value on the asset then all other bidders. For example, the winning bidder in a TAKEOVER BID may pay too much for the assets and trading connections of the JOINT-STOCK COMPANY that he has bought, because the price that he has paid has been bid up by competing bidders.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
In recent seasons, Tottenham's Juande Ramos in 2008 and even Jose Mourinho at Chelsea in 2007 have also fallen victim of the League Cup winners' curse of being out of the door within 12 months - indeed Laudrup was the only one of the aforementioned five to make it into the next calendar year.
Forget the last two weeks, he's a proper musician who could break the male winners' curse and do well.
The "winners' curse" causes us to over-value winning in a competitive situation, even to the point that the price we'll pay exceeds the value of the prize.
In particular, multiple-price auctions may be more susceptible to the winners' curse, which may cause bidders to shade their bids downwards.
Thus, the standby arrangement increases the probability that uninformed investors face a winners' curse.
Hearing this week of the sad case of former FA Cup hero Lee Martin did make me wonder whether the Wembley winners' curse has struck again.