Beware the Winner's Curse: Victories that Can Sink You and Your Company by G. AnandalingamBeware the Winner's Curse: Victories that Can Sink You and Your Company by G. Anandalingam

Beware the Winner's Curse: Victories that Can Sink You and Your Company

byG. Anandalingam, Henry C. Lucas

Hardcover | November 15, 2004

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In the roaring 1990s, many companies seemed to claim great victories-acquiring another company, obtaining state-of-the art technology, or hiring a potential CEO savior-only to find that they had made a great mistake. The term "Winner's Curse" was coined by economists to explain an effectcommonly observed in auctions. In such situations, since the winning bidder is usually the most optimistic about the value of the item being auctioned, there is a very good chance that the bid will be more (sometimes much more) than the item is worth. So a company that overvalues a good orservice, or bids higher than its value has the potential of experiencing this Winner's Curse. In this book, G. Anandalingam and Henry C. Lucas, Jr. expand the model of the Winner's Curse to explain how companies like Tyco, MCI-WorldCom and Bank One overpaid for acquisitions, and how shareholders suffered as a result. They elucidate the disasters that happened during the rush to acquire newtechnologies and illuminate the reasons that companies that were seemingly pioneers in the dot-com era fell by the wayside. Beginning by exploring the psychological, personal and market factors that can encourage a decision maker to overvalue an asset and experience the Winner's Curse, the bookgoes on to examine several case studies, including the disastrous wireless spectrum auctions that have devastated the telecommunications industry, and the dot-com bust. It concludes by discussing ways to avoid the Winner's Curse, calling for major changes in the behavior of CEOs and members ofboars of directors, as well as the use of powerful techniques for analyzing decisions, including a systems approach to decision making, scenario analysis and game theory.
G. Anandalingham and Henry C. Lucas are both at the Robert H. Smith School of Business, University of Maryland.
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Title:Beware the Winner's Curse: Victories that Can Sink You and Your CompanyFormat:HardcoverDimensions:256 pages, 6.3 × 9.21 × 0.91 inPublished:November 15, 2004Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0195177401

ISBN - 13:9780195177404

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Table of Contents

Part I. The Winner's Curse1. Origin of the Winner's Curse2. The Spectrum Auction FiascoPart II: How Psychological and Market Factors Promote the Winner's Curse3. Hubris, and the Urge to Merge and Acquire4. The Curse Can Appear Anywhere5. The Mad Scramble to Acquire Optical Technology6. Dot-coms: On Top of the World for a While7. Winners and Losers in the Securities Industry8. Complacency in the Computer IndustryPart III: How Does One Avoid the Winner's Curse?9. Winning is Not Everything10. Avoiding the Winner's Curse

Editorial Reviews

"Anandalingam and Lucas provide an excellent analysis and a critical redefinition of the concept of winning. They seriously question conventional thinking, and provide important ideas for all persons involved in both operational and strategic aspects of a business." --Joseph Vithayathil, CEO,Big Sur Communications