What do Major League Baseball teams, today's red-hot real estate market and the world's biggest stocks have in common? They can all fall victim to the winner's curse, an economic anomaly that occurs when the winning bid for an item exceeds its intrinsic value. According to the winner's curse, bidders who overestimate an item's value the most wind up winning the auction. Subsequently, they either lose money on the deal or don't make as much as they expect.
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