I have a one dollar bill. there is a crowd of people around me. I hold it up and say that i will auction the one dollar bill off, and the dollar would go to the highest bidder.
The catch? the first AND second highest bidder both have to pay me whatever they bid. For example, if the bidding stops when someone bids 1.00 and the next person bids .95, then I get 1.95, and the winner gets nothing, the second person loses 95 cents.
What would you do if you were at this auction, and there had to be at least one bid? What is the "winning" strategy, assuming that everyone will want to do what is best for them?
If my turn comes and no one bid a dollar yet, I would bid one dollar. Since we are bidding for a dollar hopefully no one will out bid me and therefore I would break even, paying a dollar for a dollar. If some one did bid a dollar already then that means that we have at least one bid and I don’t have to place a bid and therefore breaking even again.
Solution????
