Economics

Winning an auction for something of uncertain value is itself bad news

When bidders each guess independently at the true value of something, like an oil-drilling lease, the winning bid tends to come from whoever overestimated by the most. Engineers studying decades of oil-lease auctions found winning firms routinely earned below-average returns, precisely because their winning bids reflected the most optimistic, not the most accurate, estimate.

E. C. Capen, R. V. Clapp, W. M. Campbell, Competitive Bidding in High-Risk Situations — Journal of Petroleum Technology, 1971

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