One of my kids and I occasionally (ahem) play Fifa 23 Ultimate Team. As a part of that, we buy and sell online player cards through their online marketplace (with the Fifa 23 currency). See my previous post about the basic economics of supply and demand forces at work in this market. In this post, I want to delve a little bit deeper into the microeconomics, in fact, some of the game theory, behind the buying and selling that goes on in this market. We once had the following experience: we put a price on one of the player cards that we wanted to sell that we thought was a bit higher than what we would expect to get for it. To our surprise, we immediately sold the card at our stated price. And that meant we had made a mistake. We’ve experienced a form of the winner’s curse. 

In my previous post, I ignored the fact that the actual mechanism with which cards are traded is a kind of first-price auction. This was not so relevant in my previous post and is also not necessarily vital in this one, but does help a bit with my story. When you sell a player card you need to specify three things: the lowest possible price (or reserve price as mechanism designers call it) that any bid has to exceed, a buy-now price at which anyone willing to pay this price would immediately get the player card, and a time limit for how long the auction will run. Buyers can then, when they see this card in the marketplace, decide whether or not they would like to bid (an amount above the current highest bid or the reserve price if there is no bid so far), or whether or not they would like to buy the card immediately at the buy-now price.

We were selling Jovetić, a 77 gold player card, a striker, and a Hertha Berlin player. It was perhaps the 11th or 12th of May 2023. We are somewhat Ultimate Team savvy and had a pretty good idea of what the card’s value was. We did not expect to get much more than 350 Fifa coins, a price at which similar cards tended to be traded in the past. So, we put down the lowest possible price for our reserve price (every card has a lowest price below which you cannot even post it), put in 3 days for how long the auction should run for (that’s the maximum length you can choose), and put in a slightly over-priced 750 Fifa coins for the buy-now price. 

And then a moment after we posted this card, it was sold and we immediately knew that we had made a mistake. What we had not done is look up at what prices others were currently trying to sell this card. We hadn’t done our market research. If we had, we would have noticed that, for some reason, the demand for this player card and, consequently, its value had gone up significantly (for the exact reasons see my previous post).  We probably could have sold it for 2000 or 3000 Fifa coins.

Our mistake was probably not quite as bad as that of an amateur art lover bidding a high but still relatively low amount for a painting that could or could not be a real, say, Rothko painting amidst the competition of a room full of art experts and finding that they won. I imagine the following sequence of thoughts going through the amateur art lover’s mind. First, great happiness as they got a real Rothko painting cheaply outbidding all the art experts, but then, “hang on a minute, why didn’t the experts bid more? Didn’t they like it? Oh no! It’s not a real Rothko, aaaarghh”! A proper winner’s curse. The amateur art lover should have thought about this before bidding: what would I think about the painting if I find myself winning the auction with my low bid? They should have realized that winning with their low bid would mean that the painting is probably not a real Rothko and they should, therefore, have adjusted their bid accordingly to an even lower bid, one that they would be happy to pay for the painting even if it is not a Rothko painting. Or possibly, they should have informed themselves better about whether or not the painting in question is actually a Rothko painting.

Now the question is, should my son and I have done something different to avoid our, admittedly somewhat less intense, winner’s curse? The answer, as is often the case in economics, is it depends. We could, for instance, have tried to be more informed about the value of this player. But this takes a few moments and, in most cases, we don’t learn anything useful by doing this, as in most cases our initial estimate of the card value is pretty accurate. One can rationalize our decision not to have done this, with the argument that we didn’t want to take so much time checking prices because we wanted to move on to playing an (online football) game. We could also have entered a higher buy-now price for the player card, taking into account the possibility that our estimate of the card’s value might be wrong, and then let the auction determine the price. This would possibly have been a good idea, although there is a reason why we have chosen a lower buy-now price. We believe that when people are looking to buy a specific player for a more personal reason (such as just wanting to have a Hertha Berlin team, because it is the team they support) they are a bit impatient and don’t want to wait a few hours or days before they get the player. If our offer has one of the lowest buy-now prices we have a higher chance of people buying the card outright, and, thus a higher chance of selling the card at all. Quite a few player cards are never bought. While I can, thus, rationalize our decision that led to our winner’s curse, I must admit that after this experience, at least for some time, we always did our market research before selling any more cards.