Have you ever bid in a competitive auction—say, on eBay—and won the item, only to see a similar item for sale elsewhere at a lower price? If so, you may have fallen prey to the winner’s curse.
In this episode of Choiceology with Katy Milkman
, we look at bias that can lead people to overpay in auctions and other types of negotiations.
We begin with the story of Havre de Grace
. This prize filly had an exceptionally successful career as a racehorse before being auctioned as a broodmare. Expectations were high for the sale because Havre de Grace had such a strong thoroughbred pedigree. But the way the auction proceeded surprised everyone in the room.Glenye Cain Oakford
was at the Fasig-Tipton
November Mixed Sale and paints a vivid picture of a dramatic bidding process. She is an award-winning journalist, writer, and videographer based in Lexington, Kentucky. She was the senior bloodstock correspondent at the Daily Racing Form
at the time of the auction
Special thanks to Fasig-Tipton for use of the audio clips from the Havre de Grace auction.Max Bazerman
has contributed important research to the study of the winner’s curse. He joins Katy to discuss the ways in which this phenomenon can affect purchasing decisions around everything from jewelry to oil leases—and how the bias can diminish your ability to negotiate successfully.
Max Bazerman is the Jesse Isidor Straus Professor of Business at the Harvard Business School
and the Harvard Kennedy School
and the author of many books, including the upcoming book Better, Not Perfect: The Realist’s Guide to Maximu…
, which will be released later this year by Harper Collins.
Choiceology is an original podcast from Charles Schwab
. For more on the series, visit schwab.com/podcast
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