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?

Bid 99 cents, I suppose. Anything less leaves me open to a bid that someone could trump. Since there is nothing to gain, i.e. nothing to "Win" by bidding a dollar, noone would, according to your rules, and not this utopian society. What I would do is wait for the first bid. Or I could wait to see if anyone else bids, and be the second, and bid 99 cents, then the auctioner makes some money off the other chump.

In this world though, someone would bid a dollar just to screw me out of my 99 cents. The best thing to do would be to make a deal with the dollar holder, and then bid a dollar SECOND, and split the take with the dollar holder. Would be hard to convince the dollar holder to do that though. So I'll stick with 99 cents.

Posted by Lawrence on 2003-08-24 18:33:45