dollar auctions

Noun

dollar auction (plural dollar auctions)

1. A non-zero-sum sequential game designed to illustrate a paradox brought about by traditional rational-choice theory in which players are compelled to make an ultimately irrational decision based entirely on a sequence of apparently rational choices made throughout the game. It involves an auction for a dollar bill where the second-highest bidder loses the amount that they bid, making them the biggest loser in the auction.
   • Among the most terrifying of all dollar auctions followed World War II, when the United States and the Soviet Union entered into an arms race to produce more sophisticated and destructive weapons.2012, Robert Dodge, Schelling's Game Theory: How to Make Decisions, page 117