Game Theory Question
There is an auction for a $500 prize. The auction works in the following way.
Each individual can only bid once.
None of the individuals are aware of the other bids.
The winner of the $500 prize will be the person who bids the most.
The winner will pay the second highest amount submitted.
IE three people are playing
Person 1 $400
Person 2 $350
Person 3 $1000
Person 3 would win and pay $400 for the prize.
If there are only two people playing this game who are rational what number would you write down? How does this change as more people are added? How does this change if there are more people, but it is not guaranteed that they are rational?
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