Gold Star Negotiations — The Winner's Curse

Gold Star Negotiations — The Winner's Curse May 7, 2018

From buying new equipment to countering your child’s request to stay up another 20 minutes, everyone negotiates. This series is designed to provide helpful tips and tricks to use and watch out for when negotiating. See more articles in this series.

When Winning is a Curse

Negotiations

Most everyone who has won a negotiation at some point may have felt apprehensive about winning, despite achieving their purpose.

You've never heard a sports team cry, “Darn my winner’s curse. If only I could have lost that game!”  The Winner’s Curse is something a bit different as shown in the following story about when family and friends learned not to leave me unsupervised at auctions.

I was looking for furniture for college at an auction. There were a couple of auction rings going, and the furniture was not going to be sold until later. As we walked around my comrades said they were going to get something and would be right back! There I was alone with a bidding number. Suddenly, the auctioneer started trying to sell a hot tub. “Won’t anyone give me a bid? You sir, will you give $50 to get the bidding started?  $50 for a hot tub?” Sure I will start it. I mean it is worth at least $400. Going once, twice, sold for $50. Great Scott! What have I done?  What am I going to do with a hot tub?  How will I get it home?  Where will I even put it?  Why did I even bid?  Could I have gotten it for less? 

That is the Winner’s Curse. It is the feeling that you could have done better.

Avoiding the Winner’s Curse

Step one is to role play the situation. If you are negotiating with someone, imagine what would happen if they accepted your offer right out of the gate. How would that make you feel?  If you think they must know something you don’t, adjust your offer to better fit the facts. Take some time and investigate what's being negotiated. Is there some value creation that you missed in your initial valuation? 

Step two to avoid second-guessing your win later is to investigate before negotiating. Look for expert advice. Search the internet for reputable reviews or information to help identify the value of an item.

Lastly, determine if you have an edge. If you are bidding at an auction, there are a couple reasons you may be the winning bidder. One is that you might value the item more than other bidders. Items with sentimental value might mean a lot to you and little to someone else. If the item meant something to you, being the high bidder, even above fair market value, may not be an issue.

The second reason being the winning bidder is not an issue deals with your expertise and possible synergies.  Maybe you underbid a contract knowing it gets you in the door for future work with a business.  Perhaps  the other bidders do not fully understand what the item is and its worth. 

Don’t let winning get the better of you. If you do your homework, when you win you can avoid thoughts you might have done better.