The Parable of the Dollar Auction
September 19, 2008 § 7 Comments
A guy walks into a bar.
He slaps a $100 bill on the table and says “I’m auctioning off this $100 bill. Bidding starts at a dollar. The only rule is that the next highest losing bidder has to pay me too.”
Bill and Ted can’t help themselves. Bill would love to have some extra money to donate to Catholic Answers, and Ted is planning on using the proceeds to renew his subscription to Commonweal. A hundred smackers with bidding starting at a buck? What’s not to like about that?
So Bill bids a dollar. Ted tops him by bidding $2. (Heck, who wouldn’t put $2 on the line for a hundred?)
When the bidding gets up to $99, something interesting happens. Bill realizes that he is out $98 if he doesn’t bid $100, but if he bids $100 he can still break even. Being Catholic, he consults the USCCB document on game theory. It says something to the effect that if he has a proportionate reason it is fine to make a decision to limit his losses. It doesn’t mention Martin Shubik.
So he bids $100. Then Ted realizes that if he bids $101, he will only be out a buck instead of $99.
And so it goes. At some point the knife fight starts.
(Cross-posted)
Zippy Catholic 
Wow. Never heard of the dollar auction before. I learned something new. Thanks.
he consults the USCCB document on game theory.
LMAO
The whole thing is overly simplistic. You are forcing the players to assume that the game will end after their next bid, which they know won’t happen. Anybody with half a brain would cut their losses long before the bidding got equal to the prize.
[…] any special mathematical competence, and certainly have not asserted any doctrines with respect to game theory: it is up to us to competently discern the morally right thing to […]
[…] requires us to take this into consideration. The Church gives no guidance on game theory, as something outside of its charism, and explicitly disclaims expertise on what constitutes a good form of governance. This is a huge […]
It seems the correct answer is not to play; or to be the first bidder at $100.
I posted this at Fr. Z’s blog since it seems like the bidding exceeded $100 long ago.
Anybody with half a brain would cut their losses long before the bidding got equal to the prize.
And yet here we are: from “We gotta nominate Bush so that monster McCain doesn’t get it!” to, as Zippy puts it, Grandma Abortion Witch vs. Frog Casino King.