Nouha Dicko gave the home side a 10th-minute lead and then saw his cross deflected into his own net by Derrick Williams after Sam Baldock's penalty had drawn City level.
Substitute Bakary Sako then sealed Wolves' second successive home win in the 76th minute.
Cotterill said: "We played well, we played some great football. We were caught twice playing out from the back but we will carry on doing that.
"We've made a few mistakes, chosen a couple of bad options which has resulted in good goals for Wolves.
"The third goal is something from nothing, a bit of brilliance from Sako to be fair.
"Apart from that, I didn't think there was anything in the game really. I think we've come here and dominated the game for long periods.
"They definitely needed that third goal because the longer the game would have gone on, we might have had them on the back foot.
"I think 3-1 is tough on us, I really do and we won't get quite enough credit for our performance.
"I've watched quite a few Wolves games on DVD and there hasn't been any team that's come here and passed the ball against them for as long as we have.
"There was a stage when we got back to 1-1 when the crowd was right on the cusp of turning and I would have liked to see what happened if we got our noses in front.
"We made a couple of bad choices but to be fair to the players, those lads that made a mistake, they've recovered from it.
"We only have to look forward and be positive. We'll get the lucky breaks on another day but we've got to go looking for them - and when we do and we capitalise on them we'll be fine.
"We've got to stay upbeat. We didn't play like a team that was second from bottom of the table here."