Bidder Beware: With Guests Max Bazerman & Glenye Cain Oakford

May 11, 2020
Suppose you just won a hotly contested auction. How likely is it that you got a good deal?

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After you listen

Buying and selling decisions can be tricky for investors, too, but the key to long-term investing success is usually having a plan and sticking to it.

  • Listen to the Financial Decoder podcast to learn strategies for avoiding the behavioral traps that could imperil your portfolio and derail your financial goals.

Buying and selling decisions can be tricky for investors, too, but the key to long-term investing success is usually having a plan and sticking to it.

  • Listen to the Financial Decoder podcast to learn strategies for avoiding the behavioral traps that could imperil your portfolio and derail your financial goals.

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 Maximum Sustainable Goodness, which will be released later this year by Harper Collins.

Choiceology is an original podcast from Charles Schwab. 

If you enjoy the show, please leave a rating or review on Apple Podcasts.

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All expressions of opinion are subject to change without notice in reaction to shifting market conditions.

The comments, views, and opinions expressed in the presentation are those of the speakers and do not necessarily represent the views of Charles Schwab.

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