a view into the sordid life i lead

Wednesday, September 26, 2007

Lessons on the [iraq] surge from economics 101

"Economics professors have a standard game they use to demonstrate how
apparently rational decisions can create a disastrous result. They call
it a "dollar auction." The rules are simple. The professor offers a
dollar for sale to the highest bidder, with only one wrinkle: the
second-highest bidder has to pay up on their losing bid as well.
Several students almost always get sucked in. The first bids a penny,
looking to make 99 cents. The second bids 2 cents, the third 3 cents,
and so on, each feeling they have a chance at something good on the
cheap. The early stages are fun, and the bidders wonder what possessed
the professor to be willing to lose some money." [read more of this article]

It's interesting how the human condition is often incapable of giving up. You don't ever want to be the bigger sucker, so you keep gambling until the other guy looks more silly. I wonder if this is uniquely an American condition?

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