give me your $

I ended today's classes with a little exercise in how conflict can lead to irrational behavior. I offered my students an opportunity to bid on a dollar. As with any auction, the highest bidder wins. If the highest bid is $.13, then I'm out $.87. So be it. However, this auction also has my own conflict-inducing rule: The 2nd highest bidder also has to pay me their bid.

I've done this demonstration quite a few times (taken from an activity manual), and it's always produced similar results: Bidding starts quickly with multiple people at low amounts. And then someone ups the ante to an amount near a dollar. They're hoping that no one challenges them; that they've bid too high to make it profitable for others. But then that 2nd highest bidder, they still have to pay, so they keep it going. And back and forth between 2people until one finally gives up.

It's amusing (my classes would agree) to see these final 2people so conflicted about being the one to give up.

So the result? 

In both classes I sold my $1.00 for $1.01.

The 2nd highest bid?

In both classes, $1.00.

So across the 2classes I'm walking away with $2.02. I'm living large now!

(And just to make sure no one hates me for taking their money, I told them I was going to use the money to buy candy for after their exam next Wednesday.)

(Which probably means I'm going to spend over $2.02.)

(Damn.)