In common-value auctions the winner is the bidder who most overestimated the prize.
Capen, Clapp and Campbell's 1971 finding from offshore oil leases. The winner is whoever most overestimated the reserves, which is why disciplined bidders lose most auctions and profit on the ones they win.
In practice
- Nine firms value a licence between £8m and £22m, the £22m bid wins, and the asset turns out to be worth about £12m.
- A hiring panel that beat four rivals to a candidate at 30% above band discovers what the four rivals had priced in.
- Further reading
- Wikipedia
- Subject
- Games & Strategic Interaction
- Essay
- What is provable, and what people actually do