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(3): Dollars and Sense by ryan smith)

You're right. A second bid of $2.00 (or more) against an opening bid of $1.00 will certainly ensure that there is no bidding war.

But I can't think of even one earthly reason why anyone would make that bid when there is a perfectly workable strategy in place.

Posted by Sanjay on 2003-06-12 13:51:57