First the winner’s curse. Then the loser’s curse.

Niranjan Rajadhyaksha in Mint:

“Halfway through the first IPL season, there seems to be a very weak link between the money spent and actual performance on the turf. As in most other auctions, investors in the IPL business also seem to have misspent their money initially….

“Most auctions—be they for works of art or telecom licences— suffer from what economists describe as the winner’s curse. This is the tendency to get sucked into a bidding war. Bidders tend to get carried away and pay astronomical prices. Cooler heads could have bough the asset cheaper. Suppose Company A bids Rs10,000 crore for an oilfield, while Company B loses out by bidding only Rs7,000 crore. Now the winner could have bagged the oilfield by paying only a rupee more than the losing bid, but shelled out Rs3,000 crore extra. That is the winner’s curse.”

Read the full article: Winner’s curse in cricket