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Published Articles >> Table of Contents >> Abstract
15th International Conference on Electronics, Communications and Computers (CONIELECOMP'05)
pp. 280-285
Over-Optimism in Software Development Projects: "The Winner’s Curse"
Magne Jørgensen, Simula Research Laboratory
Stein Grimstad, Simula Research Laboratory
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DOI Bookmark: http://doi.ieeecomputersociety.org/10.1109/CONIEL.2005.58
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| Abstract |
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It is well known that software development projects
tend to be based on over-optimistic cost estimates.
Better knowledge of the sources of this over-optimism
is necessary to improve realism in software
development project bids and budgets. This paper
analyses the effect of "the winner’s curse". The
winner’s curse is a result of the selection of software
providers among those with the lowest bid, i.e., those
with a tendency towards the highest level of over-optimism.
The winner’s curse has not been extensively
analyzed in software cost estimation studies, but is a
well known phenomenon in domains such as
auctioning. We exemplify the effect of the winner’s
curse with data from a real software development
bidding round and simulate how increase in number of
bidders and cost uncertainty impact the expected
profit. We argue that the winners’ curse is a problem
for both clients and providers, and that it may lead to
inefficient use of scarce resources. Possible remedies
for reduction of negative effects of the winner’s curse
are discussed.
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 Additional Information
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Citation:
Magne Jørgensen, Stein Grimstad,
"Over-Optimism in Software Development Projects: "The Winner’s Curse","
conielecomp,
pp. 280-285,
15th International Conference on Electronics, Communications and Computers (CONIELECOMP'05),
2005
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