The Loser’s Curse

Richard Thaler has an article in today's New York Times on mispricing of NFL talent. In the NFL draft, losing teams trade away too much for "first pick" players, Thaler and Cade Massey argue in a recently updated paper.

"We found that the teams choosing early in the draft generally don’t, in fact, get the players that provide the most value per dollar. Our paper is titled “The Loser’s Curse” because we discovered that the first pick in the draft is, on average, the least valuable in the entire first round."
That surprising result has implications not only for football, but also for any domain where organizations try to select talent, whether C.E.O.’s or their own “rookies” — newly minted graduates."

In related news, the Times has an amusing graphic comparing some star CEOs' compensation to their companies' performance.