How to avoid 'The Winner's Curse'

Back in the 1980s, a young economist — and future Nobel winner — named Richard Thaler began writing a series of columns that challenged the dominant doctrine of his field.

At the time, most of the economics profession was smitten with a cartoonish picture of human behavior. A depiction of humans as selfish, smart, calculating, and self-controlled creatures who optimally choose what's best for themselves. It had become a bedrock of the mathematical models economists used to describe — and sometimes glorify — the free market.

Thaler rejected this model of human behavior. He pioneered the field of behavioral economics, which has sought to enrich our understanding of markets and the world by incorporating insights from psychology and other fields about how human beings actually behave. And t