Economics

Winning an auction can be proof that you paid too much

When bidders independently estimate an item's uncertain value — an oil field, a company, a free-agent contract — the winning bid tends to come from whoever overestimated it the most. Economists Edward Capen, Robert Clapp and William Campbell first documented this among oil companies bidding on offshore drilling leases: the 'winners' had systematically outbid the resource's true value and made poor returns for years.

Edward Capen, Robert Clapp & William Campbell, Competitive Bidding in High-Risk Situations — Journal of Petroleum Technology, 1971

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