The Dollar Auction is a classic game theory scenario that demonstrates how competitive bidding can lead to irrational behavior and losses for participants. It was first introduced by economist W. Brent Dorsey in the 1970s. Here’s how it typically works: 1. **Setup**: An auctioneer offers a dollar bill up for bid. The auction allows participants to bid any amount, starting at a very low value (often just a few cents).
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