Decoding Love - Andrew Trees [66]
That’s exactly the game that Martin Shubik, an economist, played a number of times with different groups of friends. As he wrote in his article, the game is ideally played under what might be called boisterous conditions: “A large crowd is desirable. Furthermore, experience has indicated that the best time is during a party when spirits are high and the propensity to calculate does not settle in until at least two bids have been made.” Shubik identified three crucial points in the game. The first was whether two people were willing to make a bid. The second crucial moment came at fifty cents when the people bidding realized that any higher bids meant that the auctioneer would make a profit. And the third crucial point was at one hundred cents when someone had, in effect, offered to give a dollar to get a dollar. At this point, his opponent would already be committed to pay his own bid and usually decided to bid $1.01. Even though he would be giving more than the dollar was worth, he would at least get the dollar and only lose one cent, rather than the value of his entire bid if he lost the auction. Once a player bid more than one dollar in order to receive one dollar, the bidding tended to escalate rapidly. Shubik kept track of the results and found that, on average, the dollar bill sold for $3.40. Since Shubik also kept the losing bid, he took in over six dollars and had to pay out only one dollar. Some of the games were even more extreme. One “winner” ended up paying twenty dollars for the dollar and only succeeded with that bid because his opponent ran out of money. On another occasion, a husband and wife bid against each other and were so upset by the experience that they went home in separate cabs.
Since then, the same game has been run in a number of research labs with the same results. In one test, more than forty groups were studied, and in each and every case the group went over the one-dollar mark. Half the time the bidding only stopped when one of the players had offered all his money and couldn’t bid anymore. Researchers also found that people rarely learned from their mistakes and that even players who had already engaged in the game would usually still end up bidding more than a dollar. What makes this especially striking is that the item being bid for—one dollar—has a precise value. There can be no confusion about what it is worth. Even the slowest of players realizes that bidding more than a dollar to win a dollar makes no sense. When researchers tried to understand why people continued to bid, they found that it wasn’t an economic calculation but an emotional one. Sure, when players started the game, they said that they were bidding primarily to win money. As the bidding moved higher, though, they changed their answers and claimed that they were doing it to prove a point, making such obviously self-defeating remarks as, “I won’t be made a fool of.” Although all of us are probably snickering at the fool who paid twenty dollars, the evidence suggests that we would be equally foolish.
Shubik’s game is not simply a parlor trick but offers an excellent way to look at the problem of escalation. You can find examples of it throughout the real world. For example, Lyndon Johnson’s rhetoric about the Vietnam War changed dramatically between 1964 and 1968. At first, Johnson emphasized democracy, freedom, and justice. Later, though, he spoke about national honor and avoiding the appearance of weakness, which as game theorist Laszlo Mero noted in his excellent discussion of the dollar auction from which this is drawn, “is strangely similar to the changes in motivation expressed in the dollar auction game.”
This conundrum is even useful in understanding our everyday lives. If you have ever been in a hurry to get somewhere and were waiting for a bus, you have probably experienced a dollar auction situation. You may be debating whether or not to take a cab, and in fact if you walk to the bus