The Winners' Curse

There is a good overview here from the FT of the winners curse (Wikipedia).

The East Coast line’s problems arise directly from the ludicrous £1.4bn National Express agreed to pay in August 2007 over the seven years it was due to operate the franchise. Two years later, the recession has laid bare the rosy assumptions it made about passenger growth, and losses have steadily mounted at the special purpose vehicle it created to operate the franchise. Once the £40m loan that National Express posted with the SPV, plus its £1m sliver of equity, are exhausted, the company has no obligation to provide more, other than a £32m bond it has already posted. The franchise will then return to the state. While the government might like to sound Churchillian about ensuring continued service, this has happened before.