Chapter 13 The Dollar Auction Summary and Analysis

As we have already seen, von Neumann was deeply pessimistic about the possibility of peace in the nuclear age. He was not the only one to share this sentiment. Many others found the logic of escalation in conflict inescapable. Some wondered if game theory might be able to model more accurately non-rational and even neurotic thinking and strategies. One example of deeply irrational behavior can be seen in the dollar auction.

The dollar auction is a game invented by Martin Shubik. Shubik was a RAND employee who enjoyed working on game theory and trying to design games with interesting mathematical properties that people could actually play. The dollar auction is just such a game. The idea of the dollar auction is simple. One person offers to sell a dollar to the highest bidder. The only...