E. C. Capen

Who they are

Capen, R. V. Clapp and W. M. Campbell are listed with Atlantic Richfield Co. on "Competitive bidding in high-risk situations", published in the Journal of Petroleum Technology in 1971. The first sentence of its abstract holds the whole idea: "If it is true, as common sense tells us, that a lease winner tends to be the bidder who most overestimates reserves potential, it follows that the 'successful' bidders may not have been so successful after all."

The authors pointed to the industry's record in the Gulf of Mexico, writing that, setting aside the era before 1950, "the Gulf has paid off at something less than the local credit union", and added that "the phenomenon we will be talking about pervades all competitive situations." Richard Thaler's 1988 review credits the paper with the first discussion of what became known as the winner's curse.

Key papers

Capen, E. C., Clapp, R. V., & Campbell, W. M. (1971). "Competitive bidding in high-risk situations." Journal of Petroleum Technology, 23(6), 641-653. doi:10.2118/2993-PA.

Key ideas

When a prize is worth roughly the same to everyone but nobody knows its value, the highest bid tends to come from the most optimistic estimate. See The Winner's Curse.

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