The winner's curse: why whoever wins an auction has usually overpaid

In 1983, MBA students bid on jars of coins worth exactly $8. On average they underestimated the jars, guessing $5.13. Yet the winning bids averaged $10.01, so the winners lost money.

That is the winner's curse. When something is worth the same to everyone but nobody knows the value exactly, the auction hands the prize to whoever guessed highest, and the highest guess is usually too high. Run the auctions yourself and find out how much you should shave off your bid to win and still come out ahead.