This is a thought experiment, not a real offer. If someone offers to sell you a $100 dollar bill for $5, you’d take that deal instantly, right? Of course! But suddenly your friend jumps in and offers $10 for the $100 and now you’re in a bidding war.
Here’s the catch: the seller says that the losing bidder has to pay him their unsuccessful bid. So, the bids escalate. $20! $50! $100 for a $100 bill -- and now you and your friend are both in trouble.
Martin Shubik’s Dollar Auction Game shows us that escalation based on rational decision-making can lead to disastrous results and trick you into playing a game you can never win… and it happens in real life way more often than we realize.
** LINKS **
Get Vsauce's favorite science and math toys delivered to your door!
www.curiositybox.com/
2018 Currency Budget
www.federalreserve.gov/foia/f...
The Fed - How Much Does It Cost To Produce Currency And Coin?
www.federalreserve.gov/faqs/c...
New $100 Bill Costs 60% More To Produce (Article from 2013)
www.marketwatch.com/story/new...
Prop Movie Money
propmoviemoney.com/product/ne...
Hasbro Monopoly Money
www.amazon.com/dp/B00000IWCW/
Tullock Auctions
blogs.cornell.edu/info2040/20...
Knee-Deep In The Big Muddy: A Study Of Escalating Commitment to a Chosen Course of Action
citeseerx.ist.psu.edu/viewdoc/...
The Dollar Auction Game: A Paradox in Noncooperative Behavior and Escalation by Martin Shubik
www.math.toronto.edu/mpugh/Tea...
Backward Induction
vknight.org/Year_3_game_theor...
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Research And Writing by Matthew Tabor
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