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Understanding “Winner’s Curse” And How To Avoid It!

Monday, November 16th, 2020
bidding strategies

Winner’s curse is something that can affect any bidder at auction, especially if they are not informed. This term refers to a bidder not knowing the value of an item, bidding too much, and then winning. Typically, this happens when the auction gets heated and leaves the winner feeling embarrassed. There are some ways to avoid the winner’s curse, though, and it is important to understand them before going to auction.

Figure out what is being auctioned (and its value)

This first step means doing more than just figuring out what will be up for auction. You will need to do some research into what each item is worth and its market history. You will also need to consider private value versus common value. Private value refers to an item’s personal value, so it will vary from person to person. Common value is just the amount that an item should be worth to every bidder, even if the future value is unknown.

Most items will have both personal and common value. For those who plan to bid on an item purely for its personal value, the winner’s curse shouldn’t be an issue. But, if the item will be re-sold, the winner’s curse could end up ruining that plan.

See if you have an advantage in the auction

A great way to avoid the winner’s curse is to know your advantages. You may have resources or knowledge that other bidders do not. This could put you in a unique position to get a better deal on an item at auction. Keep in mind that your advantage may affect the personal value of an item. You could end up paying more or less for something, so just be aware of what you are bidding on.

Think hard before choosing to bid

Winner’s curse is the auction version of buyer’s remorse. Before you take a chance on something, you should be sure of yourself. Consider if you will actually enjoy the item as much knowing you paid too much. Think about how prices fluctuate throughout history too. For example, an antique’s value will vary depending upon a variety of factors and farm equipment can vary depending on time of year. Entire markets can change every few years or take decades to shift.

Auctions in Texas

,p>If you are looking for auctions in Texas, High Plains Auctioneers has you covered. We provide a variety of these events throughout the year, including antique, estate, farm equipment, and used vehicle auctions. You can reach us at (806) 244-6776 to learn more and check out the Auctions we will have coming up soon!