> 4. The Big Insight: before you bid, stop to think about whether you're about to bid higher than you value what you're bidding on.
How do you define value? How does it consider fungible factors?
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My wife and I "overbid" on our house. We have absolutely no idea how much we "overpaid". Could be 0%, could be 10%, could be -10%.
If we did it again, we'd take the exact same approach. Winning that bid had little to do with the actual value of that house, other than knowing where to put a value on the bid. It solved a major problem for us - we need to move to a new city where housing in in extremely short supply. Putting that bid in and winning meant saving weeks/months of effort looking, touring, driving out of state, putting bids in, holding our breath, etc, etc.
In an auction, the winner will always give an unnecessary concession (whether that's excess cash or some other contractual term). That's simply the nature of competition; especially with asymmetrical knowledge.
It seems like you're using a different definition of overbid here. You didn't bid higher than what you value the house at, presumably, otherwise you wouldn't do it again.
The article clearly says that the phenomenon applies only to auctions where the final value is approximately the same to everyone.
You describe a situation where a quick purchase is very valuable to you, so getting the sale is worth a higher bid to you than to someone who could take their time getting a good price, such as an investment buyer.
So the phenomenon is much weaker or irrelevant in your case because all buyers are not estimating the same absolute value to them.
How do you define value? How does it consider fungible factors?
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My wife and I "overbid" on our house. We have absolutely no idea how much we "overpaid". Could be 0%, could be 10%, could be -10%.
If we did it again, we'd take the exact same approach. Winning that bid had little to do with the actual value of that house, other than knowing where to put a value on the bid. It solved a major problem for us - we need to move to a new city where housing in in extremely short supply. Putting that bid in and winning meant saving weeks/months of effort looking, touring, driving out of state, putting bids in, holding our breath, etc, etc.
In an auction, the winner will always give an unnecessary concession (whether that's excess cash or some other contractual term). That's simply the nature of competition; especially with asymmetrical knowledge.