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 Here's an idea
by ryan smith)
I thought of the same thing at first but then I saw a problem.
If a bidder makes an opening bid of any amount less than a dollar then other bidders can jump in with a bid which still earns a profit or at least break even. And then the bidding war begins. There is no guarantee that the bidders will be cooperative and not try to outbid any bid under a dollar.