Cognitive Scaffold

Preparing your thinking workspace

arrow_back_ios_new
MENTAL MODEL · M2211

Dollar Auction

Dollar Auction
DecideHigh supportGame Theory
Included
account_tree

Version 1.0.0 · Updated 2026-07-30

CORE DEFINITION

Auction of $1, highest bidder wins, but the second-highest bidder also pays their bid and gets nothing. - Process: A bids $0.1, B bids $0.2... When the price reaches $0.9, A bids $1 (break-even). At this point, B must bid $1.1, even though he will lose $0.1, but if he doesn't, he loses the $0.9 he already bid. To 'lose less', both sides keep raising the bid, and the final price often far exceeds $1. -

SCAFFOLDING EFFECT

psychology

Reduce cognitive load

A game model of being on a tiger and hard to get off. - It is the game version of the 'sunk cost fallacy'. In trade wars, lawsuits, or vicious price wars.

anchor

Anchor fast decisions

Auctioning a dollar but the loser also pays, leading both sides to irrationally raise bids deeper and deeper.

MINIMUM ACTION

In progress 0/1

Practice this model in one real situation:

Check to track your progress (stored locally)
Learning progress0%
account_treeGenealogyexpand_more
menu_bookReferencesexpand_more

Source support: Explicit

  • link
    en.wikipedia.orghttps://en.wikipedia.org/wiki/Dollar_auctionZH · Explicit
    verified

RELATED MODELS

Related model

Green Beard Effect

A thought experiment proposed by Richard Dawkins, referring to a gene that can produce three effects: 1. Produces a recognizable tag (such as a green beard)

arrow_forwardRelated model

Hobbesian Trap

A conflict mechanism in which each side’s fear of being attacked first encourages preemptive action and mutually reinforcing defensive preparations.

arrow_forwardRelated model

Semelparity

Semelparity and iteroparity are two reproductive strategies available to living organisms. A species is semelparous if it is characterized by a single reproductive episode before death, and iteroparous if it is characterized by multiple reproductive cycles.

arrow_forward