The winner’s curse is a phenomenon akin to a Pyrrhic victory that occurs in common value auctions with incomplete information. In short, the winner’s curse says that in such an auction, the winner will tend to overpay. The winner may overpay or be ‘cursed’ in one of two ways: 1) the winning bid exceeds the value of the auctioned asset such that the winner is worse off in absolute terms; or 2) the value of the asset is less than the bidder anticipated, so the bidder may still have a net gain but will be worse off than anticipated.
I was somewhat unaware that there was an actual distinction made between those two definitions. As such, I am not quite sure which definition the following scenario falls under:
I’ll just go with whichever one has more to do with incomplete information.