Understanding the Winner's Curse: How Overpaying Leads to Losses
Welcome to the Bryan Foltice Behavioral Finance Podcast! In this episode, host Dr. Bryan Foltice delves into the intriguing phenomenon of the winner's curse—a situation where winning can actually mean losing. By examining real-world examples ranging from eBay auctions and trading card businesses to sports contracts and major acquisitions, Dr. Foltice explains how overconfidence, emotional decision-making, and asymmetric information often lead to overpaying. He also shares practical strategies to recognize and avoid falling victim to this financial pitfall. Tune in for valuable insights on making smarter, more informed financial decisions.
00:00 Introduction to the Brian Foltis Behavioral Finance Podcast
00:27 Understanding the Winner's Curse
01:36 Personal Experience with eBay Auctions
04:47 Emotional Decision Making in Auctions
05:37 The Loser's Curse in Sports Contracts
07:28 Overconfidence and Emotional Decision Making
10:29 Examples of the Winner's Curse in Business
14:12 Avoiding the Winner's Curse
17:20 Conclusion and Listener Engagement
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