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?

(In reply to re(2): Bang for the Buck by Sanjay)

But somebody has got to bid for the dollar.
One way you could do this and still have everyone break even is by one person bidding $1. Nobody sane would bid any more than $1 for $1, so whoever bid would get there dollar back and everyone else will have all the money that they started with.

Posted by Lewis on 2003-06-03 09:59:39