It would be cheeky of me to say there is no need to review a book partially authored by a Nobel economic prize winner that is in its third edition. That heritage should speak for itself. Even in its third and updated version, it is relevant and entertaining. More importantly, the website accompanying the book ( thewinnerscurse.org ) provides useful teaching and experimental replication materials.

The title of the book comes from the well-known phenomenon of a person or organisation winning an auction and then feeling regret once they figure out that they paid too much. It is a common occurrence ranging from companies with highly paid analysts bidding for oil fields, to take-overs in equity markets, IPOs (think SpaceX) and me at charity dinners where auctions of various experiences are offered. Any regret I may have after “winning” (i.e. paying over the odds) for dinner at a fine restaurant is offset by my knowing that the charity gets some money and a sense of virtue. There is no excuse for the oil company, the company bidding in the takeover, and the investors buying IPOs. They are well informed. They should make decisions based on a cool assessment of the facts and risks involved. In other words, they should behave in a rational manner. That they do not violates a cornerstone of mainstream economics and finance

The winner’s curse is not the only violation of the rational actor hypothesis. Many others arise. These violations present anomalies that mainstream economics and finance cannot explain. These anomalies formed the basis of a series of columns authored solely or jointly by Richard Thaler in the Journal of Economic Perspectives (JEP) (a newly-created journal published by the American Economic Association at the time) from 1987 onwards. The columns were originally presented in each issue of the JEP, which is issued quarterly, for many years afterwards. Co-authors of the columns have, like Prof Thaler, gone on to influential positions

The columns proved to be some of the most read of all articles published by the AEA. In 1992, they were compiled into a book titled “The Winner’s Curse”. Those interested in a fuller explanation of the influence of these columns on the economics establishment should read chapter 17 of Richard Thaler’s 2015 memoir “Misbehaving”. https://spe.org.uk/reading-room/book-reviews/misbehaving-how-economics-became-behavioural/ 

Unfortunately, the publisher of the Winner’s Curse was going out of business and the book was threatened with going out of print. This is why this (third) edition came into existence. Richard Thaler, with the help of another and younger academic at the University of Chicago, Alex Imas, updated and republish the book.

The book has 12 chapters covering anomalies in mainstream ideas such as utility maximization, the law of one price, risky decision making, and choosing between now and later (present bias). Each chapter begins with an almost exact repetition of the original column. That is followed by a section updating the original research with more recent information. There are useful notes with up-to-date references. The website mentioned in the first paragraph provides useful teaching slides and replication materials that can be used to repeat the experiments demonstrating the anomalies in a classroom setting. This website is admirable. It is entertaining and practical.

The confidence Thaler and Imas have in republishing the book is that the anomalies have stood the test of time. But why do the authors have such confidence given the replication crisis in psychology and behavioural economics? The authors address this in the preface. “Another reason to providing the Updates is that behavioural economics explicitly borrows from some findings from psychology, and there are some subfields from psychology that have been experiencing what has been referred to as a “replication crisis”. …. We are pleased to report there is no evidence of anything that could be called a replication crisis for the set of topics covered in the Anomalies columns upon which this book is based.”.

Whether the teaching and practice of economics has been changed by the decades of work by Thaler and others who have challenged economic orthodoxy is addressed in the epilogue. The authors seem disappointed: “ So, behavioural economists are thriving. But it would be a gross restatement to claim there has been some kind of paradigm shift in economics. It seems that it is respectable to do behavioural economics research, but it is not yet considered necessary to accommodate those findings in the standard economics curriculum.” (p.255)

There is an entertaining 2025 University of Chicago podcast Capitalisn’t where Richard Thaler is interviewed by Luigi Zingales and Bethany McLean ( see https://www.capitalisnt.com/episodes/nobel-economist-reveals-why-economic-models-keep-failing-us-ft-richard-thaler) where Richard Thaler outlines many of his ideas, not only from the Winner’s Curse book but otherwise that provides additional information to support not only the book but challenges to economics and economic policy in general.

For those interested in online materials explaining core concepts underpinning behavioural economics, the website accompanying this book could also be coupled with the useful site by Jason Collins https://be.jcx.au/ Jason Collins also has a useful YouTube channel https://www.youtube.com/@jasonacollins/videos

Adam Oliver’s YouTube channel on Behavioural Public Policy https://www.youtube.com/@adamoliver5942/videos  can also be recommended. It is also worth noting that the majority (if not all) articles in the Journal of Economic Perspectives https://www.aeaweb.org/journals/jep/issues can be downloaded for free. This includes the original Anomalies columns.