Overpaid, in simple terms, means to have paid too much for a good or service. The dictionary definition of overpaid (gleaned from dictionary.com) seems to me to be inadequate. What does too much really mean? As I see it, there are a couple of standards which are commonly used:
Payment of a sum above the market value. This is usually the result of ignorance on the part of the buyer and a failure to negotiate properly (or at all, in many cases). This commonly happens when people are buying a car and pay $1000 more for a vehicle than the guy down the street charges. There is some bitterness when the buyer realizes what has happened, but caveat emptor is one of the more useful Latin phrases. Whenever I do this, the object of my bitterness is myself, and my own impetuousness.
Payment of a sum above what you think the market value should be. This is also very common, and is somewhat misguided in my mind. This type of thinking is the sort of thing that seems to inspire government interference and price controls, if not out and out socialism. It can also be the inspiration for entrepreneurial endeavors, for, if you think a good or service should be cheaper, what better way to prove it than to go out and actually provide it for less money?