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: Dollars and Sense by ryan smith)

Hello - I am the auctioneer's friend.

I'm bidding $1 to try to make you lose as much money as possible.

Whatever money I lose my friend (the auctioneer) pays me back, and splits the profit. Therefore, I would like a bidding war.
(You get the picture).

But then again, there's no guarantee that this won't happen with an opening bid of $1 either...

Posted by Lewis on 2003-06-10 06:21:56