When you place bids or asks in a market where some participants are knowledgable ('informed'), the execution of your transaction indicates a likelihood that you

When you place bids or asks in a market where some participants are knowledgable ('informed'), the execution of your transaction indicates a likelihood that your counterparty is one of those informed traders. This should prompt you to adjust your initial bid or ask price. Knowing this dynamic in advance, you can set your initial bid or ask with the assumption that it will be executed by an informed trader, or assuming an X% chance that the trader is informed. This is part of the reason for the existence of bid/ask spreads. Winner's curse seems similar. When deciding your bid, you have to decide 'if I will in the auction at this price, will I be happy?'. This is subtly different from "what's the most I'm willing to pay based on the information I have today?".