Talk:Dollar auction

message: According to Dr. Martin Shubik the formal precommitment mechanism in 1971, needed to know that there was atleast 2 or more precommitted bidders in the auction event before the decision to initiate the bidding phase was made.
In 2012, the formal precommitment mechanism was converted into a computer algorithm, also known as the prefunding algorithm.
Dr. Martin Shubik has formally admitted that prefunding algorithm can be considered as the original way of doing business in 1971.
It was considered commonsense knowledge in 1971 that auction needed to have atleast 2 or more precommitted bidders before the decision to initiate an auction was made. 
Bids were sold under "use them or lose them" contract.
A dollar auction does not induce rational players to overpay for the dollar. It is trivially easy to understand this. All players have the option to earn $0 by never bidding. Thus, each player's expected payoff must be at least 0. Further, the game has a clean solution found here: http://www.math.toronto.edu/mpugh/Teaching/Sci199_03/dollar_auction_2.pdf
The article needs to be rewritten and framed using the above article. As is, the article is wrong.  — Preceding unsigned comment added by 75.84.163.162 (talk) 02:40, 24 December 2014 (UTC)
replies: text: I would add that the original paper (by Shubik) in *no* way claims that the series of choices that lead to the loss are 'rational'. Shubik agrees that there are rational game theoretic solutions that don't lead to losses. Rather, his explicit point is that the game theoretic (rational) solution isn't a good model for actual human behavior. In Shubik's words: "the game theory model alone does not appear to be adequate." The idea that the actions that lead to losses are 'rational,' or even consistent with some traditional economic model of rationality is totally unsubstantiated by, and somewhat inconsistent with, the sources cited. Shubik's paper *is* a critique of rational choice theory to an extent - in that he holds this game up as an example of a case where human behavior is irrational. But it is totally untrue that this game shows rational choices leading to an ultimately irrational decision.98.245.84.83 (talk) 02:56, 30 December 2014 (UTC)
replies: text:  I don't quite agree with the claim that this example show that human behaviour is irrational. The very fact that at some point when the bid is x > 1 the players will definitely stop playing the game, knowing that it is better to accept the loss x than to continue since the other player might push the bid to more than x+1 and then stop, resulting in the loss being more than x. This shows clearly that the players who start playing are not irrational but merely foolish or rash, and that players who realize their foolishness but continue playing are merely suppressing their better judgement in the hope that the other players will stop soon enough. In the latter case, they are consciously suppressing their own knowledge that continuing can lead to greater loss, though if they even stopped one moment to think about it, they would realize that the only way they can reduce their loss is if other players are not like them. So while one can argue that the observed behaviour during the game is irrational, the underlying reason for the behaviour is not due to irrationality but rashness and perhaps some ego (preventing backing out of the challenge). In other words, it is not like the players sincerely believed that their strategy is correct after playing the game, which shows that they would consider playing to be an error!  — Preceding unsigned comment added by 137.132.219.48 (talk) 07:06, 18 July 2016 (UTC)

text: The game is rational to the auction keeper and to the players, since amongs the players the winner will receive the best deal and gets to maintain his reputation and the other participants (losers) pays for the winners prize. all-pay_auction
 There is a "2 or more precommitted bidders" auction initiation criteria that has been ignored for quite some time.  — Preceding unsigned comment added by MikoFilppula (talk • contribs) 12:06, 30 October 2016 (UTC)

text: It says in O'Neill, International escalation and the dollar auction, p35 "Assume that by some arbitrary mechanism one of the players acquires the ability to make the first bid." Do the players know something about this mechanism, e.g. whether it is random or constant? Polskiblues (talk) 13:02, 9 April 2019 (UTC)
thread_title: The article is completely wrong since its missing Formal Precommitment Mechanism

message: I've expanded the Setup section, as without my additions, the description was insufficiently detailed and it did not explain clearly enough what happens to anyone unfamiliar with the topic. I used my own lecture notes which were based on the Colman reference as a guide, and added a reference to that book in an appropriate place later on. I hope that doesn't upset anyone here.  DDStretch  (talk) 12:44, 27 July 2007 (UTC)
replies: text: The original paper, and many other sources primarily discuss the two-player version of the game. As it is, the article is clearly assuming the two player version without stating that explicitly. That should probably be fixed. 98.245.84.83 (talk) 15:43, 30 December 2014 (UTC)
thread_title: Adding material and possible error in formulation

message: Isn’t it a winning strategy not to play? Roman V. Odaisky 20:40, 28 July 2007 (UTC)
replies: text: In addition it would seem that if the first bidder bids 99 cent noone has a motive to bid higher, so that the best one can do, would be to gain 1 cent 87.66.222.129 18:24, 3 October 2007 (UTC)
replies: text:  I agree. putting in one cent is provably irrational if one looks ahead. A 99 cent bid would be optimal if no one in the room is a jerk; otherwise no bid is the best choice. Cute paradox, probably worthy of an article, but a low-tier one IMO. --Headcase (talk) 23:21, 27 May 2009 (UTC)
thread_title:  Winning strategy 

message: The first paragraph of the "Refutations" section should be removed. The sort of collaborations it describes violate the premise of a game in game theory.  —Preceding unsigned comment added by Emperor Will (talk • contribs) 21:09, 26 August 2008 (UTC)
thread_title:  Refutations 

message: I have two questions about the current presentation of the game in the article (and in general). First, Shubik presented the game as having a $0.05 bid increment. I would lean toward following him, but I haven't read the other sources yet, and $0.01 increments work to. Thoughts?
Second, I'm a little stumped at the moment about the tie-breaking rules, which should be detailed for the game to be complete. Shubik's a little confusing on this point (to me). CRETOG8(t/c) 22:13, 10 September 2008 (UTC)
replies: text: On point 1: Donno, you would think that as just the best-known example of the concept of an All-pay auction that a solution would be phrased in terms of a continuous quantity.  On two, there must be some general Econ solution to ties in auctions (I know what we do for biology models, but Econ's must be different, and actually usable in the Real World). Pete.Hurd (talk) 22:46, 10 September 2008 (UTC)
replies: text: So far for this, I've seen discrete bid increments. I think that may well be important for the model. For ties, the standard in economics is to select the winner randomly in the case of a tie. Shubik says in the event of a tie, the winner is "the bidder closest to the auctioneer" (not an actual quote, I don't have the paper in front of me). That could be interpreted as random, but it could also be interpreted as meaning that the winner in the case of a tie is assigned at the beginning of the game, and so can be part of the strategy. CRETOG8(t/c) 23:23, 10 September 2008 (UTC)
replies: text: You should have discrete bid increments simply because it's the weaker assumption - "even if" bids must be discrete, there's still no equilibrium in this game (i.e. assuming discrete increments restricts the strategy space). Also if you have bid increments, then the only possible tie is nobody bid nothing, right?radek (talk) 02:45, 1 November 2008 (UTC)

text:  Ah, ok, I'm wrong. The way it is presented here the discrete-vs-continuous does matter. Additionally, there's I believe another version of this game, where both players pay the second highest bid. This eliminates the "bid 99 cents" or "bid 1$" strategies as equilibria. Another way to get this is to assume that the bids actually DO have to be incremental. I.e., the first bid must be, say, 5c, the second 10c and so on.radek (talk) 02:55, 1 November 2008 (UTC)
thread_title:  Game presentation 

message: I don't think it should be linked here... Sure, the article explains that the dollar auction is irrational, but linking to the site still seems a lot like free advertising to me (especially since the site's relevance isn't explained, and since it isn't exactly the same game). sten for the win (talk) 00:56, 17 December 2008 (UTC)
replies: text: I agree, and pulled it out. CRETOG8(t/c) 01:11, 17 December 2008 (UTC)
thread_title: Swoopo?

message: Some recent edits removed "fact" tags on some of the stuff in the "Refutations" section. Whether the stuff is obvious or not, the thing is that WP requires verifiability not truth. The important thing for this article is that we aren't coming up with our own refutations, but describing possible refutations that others have come up with. CRETOG8(t/c) 18:28, 19 January 2009 (UTC)
replies: text: Please discuss here rather than in edit summaries--they don't leave much room, and also make edit warring the only way to discuss. You commented, "How do you reference a logical statement? Would you need a reference for "2 + 2 == 4"?". You wouldn't need a reference for 2+2=4, but you would need a reference before saying that 2+2=4 argues against X. Otherwise, I could derive lots of my own logically valid arguments throughout game theory articles, but that would be WP:OR. The bit in question is talking about a specific alternative approach to the dollar auction--there could be infinite such approaches. It should only be in the article if it's notable--if an article or textbook or something proposes this approach. CRETOG8(t/c) 22:22, 19 January 2009 (UTC)
replies: text:  Please give a couple more examples of the "infinite varieties".  The article would only need references if it claimed that those solutions were the only ones or if it claimed they were mentioned specifically.  Otherwise it is just trivial and there is nothing to reference.  The article does not say "2+2=4 argues against X" it says "2 + 2 = 4" argues for "2 + 2 > 3".  The arguments in that section are so basic nobody would bother to publish them for referencing. Turkeyphant 00:23, 21 January 2009 (UTC)

text: What's your point? Turkeyphant 16:56, 22 January 2009 (UTC)
thread_title:  Refutations again 

message: I removed the reference to the expected value. The concept of expected value makes sense only in context of random variables. As there are no clearly defined random variables here, the reference to the expected value does not make sense. I assume this part of the article was original research as no citation was also provided.
:Expected value can make sense, because in analyzing the game players are likely to play (or at least be allowed to play) mixed strategies, and that's where the random variables come in. Nonetheless, the material you removed was uncited and a muddle, so I think the removal was a good idea. CRETOG8(t/c) 14:56, 5 February 2009 (UTC)
thread_title: The expected value

message: seriously, im sure scholars and internet people can debate this to death and it has its implications for the definition of 'rational player' and such.... but is it that hard to find a 'generous benefactor' to put $1 up for auction. not as an undisputed answer to this paradox, that would be like experimentally testing Schrödinger cat. it would be a nice demonstration about how rational people can diverge from the 'perfectly rational' model and get a better outcome. just like the travelers dilemma. I predict that smart players would end up at a tie bid of either 50 cents or 1 dollar. at 50 cents they break even. if they dont have the foresight to stop at 50 cents then surely they would stop at 1 dollar because at that point it is no longer profitable to either player.   —Preceding unsigned comment added by 96.234.107.175 (talk) 15:40, 10 July 2009 (UTC)
replies: text: Purely anecdotal, but I have seen this carried out in real life, with a group of 4-6 people rather than two. The results were pretty mind-boggling: they kept bidding far beyond when it would have been rational to stop. I can't remember how much the dollar eventually went for, but I think it was at least $5. Goes to show that in real life, people are just not rational and don't think about the consequences of their actions. I'm just glad I had the good sense to stay out of it. Robofish (talk) 23:32, 21 April 2011 (UTC)
replies: text: Also seen this done in real life. Yes, it happens the way the theory predicts, except with real money the players do eventually realize how pointless it is and stop - though way beyond 1$ bids.Volunteer Marek (talk) 05:34, 7 July 2011 (UTC)

text: Maybe it's a cultural difference or maybe because I introduced the game as "pretend" (because I was in a class-room setting and because I didn't want to have people burned and angry), but my Korean students easily beat the game immediately.  One of 10 students bid, another bid; and then the first one said, 'Let's stop and share it.'  If it had been for real, I would have been  
out 88% of the 10,000 weon note (roughly worth $10). Kdammers (talk) 07:03, 5 November 2013 (UTC)
thread_title: has anyone bothered to attempt this

message: See my question here on the "Polish Auction" which is sometimes known as a "Dollar-Dollar Auction". While I doubt these are directly related to the main subject of this article I was wondering if anyone had run into any game theory research on the subject. I figure the similarity in names might have caused a serendipitous connection. :) 66.97.213.94 (talk) 19:49, 11 October 2010 (UTC)
thread_title:  Dollar-Dollar Auction 

message: The article claims that the "Dollar Auction" contains a paradox, but it is not clear where the paradox lies.  What does "complete information" mean in this context?  Can the bidder assume that the other bidders (if any) are rational?  Consider these cases:
1. There is only one bidder, Alice.  She knows there are no other bidders.  She bids 5c.  She wins.  Done.
The formal precommitment mechanism made sure there is atleast 2 or more precommitted bidders in the room before auction was initiated.
2. There are other bidders, but Alice gets to bid first (and she knows that).  She bids 95c.  The other bidders are rational and nobody bids 1$ because bidding is extra work for no gain.  Alice wins.  Done.
The formal precommitment mechanism made sure there is atleast 2 or more precommitted bidders in the room before auction was initiated.
So, again, where is the paradox?
So there was atleast 2 persons who had bought bids towards the auction.
Bids were sold on "use them or lose them" contract.
'''
Luigi Semenzato  — Preceding unsigned comment added by 2620:0:1000:3803:A800:1FF:FE00:54E8 (talk) 01:12, 1 June 2013 (UTC)
replies: text: Very good point, Luigi. Maybe at 95 cents some-one might be "foolish" enough to jump in, but certainly at an initial bid of 99 cents, there is no normal (i.e., game theoretical) incentive to enter into the bidding:  Alice wins one cent, and no-body else (except the auctioneer) loses, since the next possible bid would have to be $1 (break-even and hence a waste of effort) or above (loss for the bidding party (only some-one perverse or Alice's ex-boyfriend would be interested in doing this, and neither fits normal game-theoretical conditions).
As far as research goes, there is an academic article, but with the pay-wall, I can't say if it actually includes empirical research in spite of the statement about results on the first page: http://www.jstor.org/discover/10.2307/173254?uid=3738392&uid=2&uid=4&sid=21102869324217 .  The author "ignores" both co-operation and the 99 cent solution.  
Another article >is< a report of an actual experiment.  the fact that it was done with MBA students might explain the extreme results: http://jme.sagepub.com/content/26/1/56.abstract .Kdammers (talk) 07:18, 5 November 2013 (UTC)
thread_title:  Either the paradox is moot, or the article does not explain it well 

message: If the minimum bid is 5 cents how can the superrational guys bid 1 cent? Palosirkka (talk) 06:08, 30 April 2014 (UTC)
thread_title:  I don't understand, thanks to vandalism? 

message: According to Dr. Martin Shubik the formal precommitment mechanism in 1971, needed to know that there was atleast 2 or more precommitted bidders in the auction event before the decision to initiate the bidding phase was made.
In 2012, the formal precommitment mechanism was converted into a computer algorithm, also known as the prefunding algorithm.
Dr. Martin Shubik has formally admitted that prefunding algorithm can be considered as the original way of doing business in 1971. 
It was considered commonsense knowledge in 1971 that auction needed to have atleast 2 or more precommitted bidders before the decision to initiate an auction was made.  — Preceding unsigned comment added by MikoFilppula (talk • contribs) 08:38, 30 October 2016 (UTC)
replies: text: This is very interesting, as the original article be Shubik does not give enough information on how the game is actually defined. Can you please give us a source on this? Polskiblues (talk) 12:00, 7 April 2019 (UTC)
thread_title:  Formal Precommitment Mechanism