A team was in pursuit to sign a highly sought-after free agent. It gave the player the highest offer of all the teams, and ultimately signed him to a high-paying contract. The player did not live up to expectations during the subsequent season. This is an example of:

Question

Copper

Business

3 May, 12:53

A team was in pursuit to sign a highly sought-after free agent. It gave the player the highest offer of all the teams, and ultimately signed him to a high-paying contract. The player did not live up to expectations during the subsequent season. This is an example of:

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Answers (1)

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Maddox Bush · Answer 1

a winner's curse

Explanation:

Based on the scenario being described within the question it can be said that this is an example of a winner's curse. This term refers to a phenomenon in which all bidders have the same value for an item but tend to receive different private signals regarding the value for the item. This makes the winner usually end up being the individual with the most optimistic evaluation of the asset that is being purchased. Which seems to be the case in this scenario, since the team gave the player the highest offer, thinking that was a good value, but the player turned out to not be worth that value.