<story><title>Winner’s Curse: Negotiation Mistakes to Avoid</title><url>https://www.pon.harvard.edu/daily/business-negotiations/how-to-avoid-the-winners-curse/</url></story><parent_chain><item><author>chias</author><text>Doing my best to summarize what I got from this article:&lt;p&gt;1. In an auction, is possible to over-bid on a thing&lt;p&gt;2. If you over-bid on a thing and you win, that&amp;#x27;s not good&lt;p&gt;3. It&amp;#x27;s better to not win the auction than it is to win it by bidding higher than you value winning the auction&lt;p&gt;4. The Big Insight: before you bid, stop to think about whether you&amp;#x27;re about to bid higher than you value what you&amp;#x27;re bidding on.&lt;p&gt;...what am I missing? Why is this interesting? What does this have to do with negotiation? What are the negotiation mistakes to avoid?</text></item></parent_chain><comment><author>yccs27</author><text>Intuitively, you might think &amp;quot;I&amp;#x27;ll just bid a few cents less than what the thing is worth to me, then I&amp;#x27;ll get a fair deal&amp;quot;. However:&lt;p&gt;1. You likely don&amp;#x27;t know the value exactly, so you might overbid (or underbid)&lt;p&gt;2. If you overbid, you will probably get the thing and lose money&lt;p&gt;3. If you underbid, you are less likely to be awarded the thing, so on average the gains (from getting it below value) are lower than the losses (from overpaying).&lt;p&gt;4. The Big Insight: To still get a good deal on your average auction &lt;i&gt;win&lt;/i&gt;, you need to adjust your bid downwards to account for your imperfect knowledge.</text></comment>
<story><title>Winner’s Curse: Negotiation Mistakes to Avoid</title><url>https://www.pon.harvard.edu/daily/business-negotiations/how-to-avoid-the-winners-curse/</url></story><parent_chain><item><author>chias</author><text>Doing my best to summarize what I got from this article:&lt;p&gt;1. In an auction, is possible to over-bid on a thing&lt;p&gt;2. If you over-bid on a thing and you win, that&amp;#x27;s not good&lt;p&gt;3. It&amp;#x27;s better to not win the auction than it is to win it by bidding higher than you value winning the auction&lt;p&gt;4. The Big Insight: before you bid, stop to think about whether you&amp;#x27;re about to bid higher than you value what you&amp;#x27;re bidding on.&lt;p&gt;...what am I missing? Why is this interesting? What does this have to do with negotiation? What are the negotiation mistakes to avoid?</text></item></parent_chain><comment><author>rocqua</author><text>A core point is the line &amp;quot;Analyze whether the asset has a common value element. A common value asset, like a jar of coins, has equal value to all bidders. If so, bid with caution.&amp;quot;&lt;p&gt;In auctions where the asset does not have equal value to all bidders, the winners curse is less likely to apply. Because if you guess the value of the object higher than all others, that can happen because it is fundamentally worth more to you, rather than because you had the most over-estimation.</text></comment>