In both popular level books on economics/rationality/etc., and videos of actual economics lectures, I keep running into the suggestion to bid in a common value auction as though victory is already guaranteed. For example, from this Yale lecture...
So the lesson here is, bid as if you know you win. Now why is that a good idea? Let’s go back to this case of now you discover you’ve won. Provided you bid as if you know you won, when you win you’re not going to be disappointed because you already took that information into account. But if you bid not as if you won, you failed to take into account the possibility of winning, then winning’s going to come as a shock to you and cause regret. So the only way to prevent this ex-post regret, the only way to bid optimally, is to bid as if you know you’re going to win. Estimate the number of coins not on your own sample but on the belief that your sample is the biggest sample.
This makes very little sense in my mind. I understand why the winner's curse emerges from naive bidding, but the prescription for countering it seems silly. If I condition my bid on the knowledge that I'm certainly going to win, then my bid will be the second lowest bid possible (in other words, the lowest bid that could actually be a winning bid). If I am restricting my view of what outcomes may occur to the possible worlds where I win the auction, then my optimal bidding strategy would be to select one of those worlds in which I pay the lowest cost for the item. On the other hand, if I do not allow my strategy to vary in response to the stipulated information that victory is guaranteed, then I will end up bidding as though I do not know of the winner's curse construct.
What is going wrong in my thinking about this prescription?