And The Winner Loses

In a nod to the winner's curse, Comcast stock fell 8 percent today when it was announced that the company outbid rival Fox in the three round auction of British broadcaster Sky. Comcast's winning bid was for $40 billion. The price was about 27 percent higher than Comcast's initial bid. In any auction, the winner ultimately is the bidder willing to pay more than any other bidder, increasing the likelihood that the winner overbid, resulting in a a negative NPV.