Liger wrote:The economic definition of rationality is that "a choice is rational if making said choice will result in more profit than not making the choice."
Frank wrote:The game is supposed to be applied with real life application...
Two companies buying out a third one. Both of them does not want to let the other control too much of the market. At one point, you're overbidding, more than you should... But that never happens, right?
The real life example: the last cookie in the box with your brother. At one point the quantity of energy spent arguing is greater that what you'll get (minus the fist fights).
Or the last nice looking girl of a club. She'll see it's not a Mercedes...
mrjones wrote:I looked at the talk page for the Wikipedia article, and it seems that the article (and Zach's comic) is basically incorrect and the point of the game is NOT to show that "rational choices can lead to irrational behaviour" (which is, as far as i understand, nonsense), but rather to argue that people will typically not behave rationally in this kind of situation.
The dollar auction is a non-zero sum sequential game designed by economist Martin Shubik to illustrate a paradox brought about by traditional rational choice theory in which players with perfect information in the game are compelled to make an ultimately irrational decision based completely on a sequence of rational choices made throughout the game.
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