A Game You Can Never Win

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!
https://www.curiositybox.com/

2018 Currency Budget
https://www.federalreserve.gov/foia/files/2018currency.pdf

The Fed - How Much Does It Cost To Produce Currency And Coin?
https://www.federalreserve.gov/faqs/currency_12771.htm

New $100 Bill Costs 60% More To Produce (Article from 2013)
https://www.marketwatch.com/story/new-100-bill-costs-60-more-to-produce-2013-10-08

Prop Movie Money
https://propmoviemoney.com/product/new-style-100-full-print-prop-money-stack/

Hasbro Monopoly Money
https://www.amazon.com/dp/B00000IWCW/

Tullock Auctions
https://blogs.cornell.edu/info2040/2012/09/25/losing-to-win-tullock-auctions/

Knee-Deep In The Big Muddy: A Study Of Escalating Commitment to a Chosen Course of Action
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.470.3668&rep=rep1&type=pdf

The Dollar Auction Game: A Paradox in Noncooperative Behavior and Escalation by Martin Shubik
http://www.math.toronto.edu/mpugh/Teaching/Sci199_03/dollar_auction_1.pdf

Backward Induction
https://vknight.org/Year_3_game_theory_course/Content/Chapter_07-Extensive_form_games_and_backwards_induction/

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Vsauce2 Links

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Hosted, Produced, And Edited by Kevin Lieber
Instagram: http://instagram.com/kevlieber
Twitter: https://twitter.com/kevinlieber
Website: http://kevinlieber.com

Research And Writing by Matthew Tabor
https://twitter.com/matthewktabor

VFX By Eric Langlay
https://www.youtube.com/c/ericlanglay

Huge Thanks Paula Lieber
https://www.etsy.com/shop/Craftality

Select Music By Jake Chudnow: http://www.youtube.com/user/JakeChudnow

BetaSeries' opinion

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S01E338 - Double Sixes Death Game