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 decisionmaking 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/f...

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

New $100 Bill Costs 60% More To Produce (Article from 2013)
https://www.marketwatch.com/story/new...

Prop Movie Money
https://propmoviemoney.com/product/ne...

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

Tullock Auctions
https://blogs.cornell.edu/info2040/20...

KneeDeep In The Big Muddy: A Study Of Escalating Commitment to a Chosen Course of Action
http://citeseerx.ist.psu.edu/viewdoc/...

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

Backward Induction
https://vknight.org/Year_3_game_theor...

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Hosted, Produced, And Edited by Kevin Lieber
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Website: http://kevinlieber.com

Research And Writing by Matthew Tabor
  / matthewktabor  

VFX By Eric Langlay
   / ericlanglay  

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

Select Music By Jake Chudnow:    / jakechudnow