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?

This was just my initial thought, but I haven't reasoned it out yet, so I admit I am probably way off. What about bidding 50 cents right off? Here's why I thought of it:

If I were just watching people bid (1 cent, 5 cents, 23 cents! and so on) I would say to myself "Self, if anyone bids 50, don't bid even 51 because then the auctioner will start to get a good deal." But this is more of a "I want to make a profit AND not let anyone else make a profit" which might not be everyones strategy.

However, if everyone were like me then no one would want to bid 51 (even though they could make 49 cents on the deal, the auctioner would make a pretty penny), and I would get the dollar for 50 cents.

Like I said, just a thought.

Later!

Posted by nikki on 2003-06-03 12:57:32