The IPL mega auction offers more than expensive player deals. It also reveals how emotions can overpower planning. Franchise owners face psychological traps similar to those affecting stock market investors.
Sunk Cost Fallacy
Consider a team that values a star player at ₹12 crore. A rival pushes the bidding to ₹13 crore. The first team remembers hours of preparation and other players it missed. Walking away now feels like wasting that effort. It raises its bid to ₹15 crore, abandoning its original limit.
This is the sunk cost fallacy. People let past spending or effort influence decisions that need fresh judgment. An investor might similarly hold a falling stock because it has already lost 30%. Instead of examining its current value, the investor waits for recovery.
Winner’s Curse
Another trap is the winner’s curse. A team pays ₹25 crore for one player from its ₹100 crore budget. Celebration soon gives way to concern. With much of its money spent, the team must choose cheaper, unproven players. Its remaining 20 squad places become harder to fill without weakening team balance.
Winning the bid can therefore result in a loss. The price paid exceeds what makes sense for the buyer. Investors face something similar when buying heavily promoted shares at extremely high prices. Excitement can fade quickly when prices fall after listing.
FOMO
Scarcity creates another powerful pressure. Suppose only two Indian fast-bowling all-rounders can bat at number seven. Teams fear losing a rare opportunity. A high opening bid then becomes their reference point, even when it seems inflated.
This is anchoring bias, where the first number strongly shapes later decisions. Investors can anchor their expectations to a share’s previous peak or sudden price jump.
Fear of missing out (FOMO) adds urgency. Together, these feelings encourage expensive purchases while financial figures receive less attention.
Herd Behaviour
The auction room also encourages herd behaviour. When bigger franchises like Mumbai, Chennai or RCB chase one overseas star, other teams may join. They assume these franchises know something about his fitness or future form. Their own assessment gets replaced by confidence in somebody else’s judgment.
Investors behave similarly when following large institutions or financial influencers into fashionable sectors. Popularity starts looking like proof of value. Such crowd behaviour can fuel sharp price rises and painful falls.
Even wealthy owners with expert teams can overpay under emotional pressure. The same pressures make ordinary investors chase rising prices and ignore their original plans.
Disclaimer: These examples explain behavioural biases and do not offer investment advice.