It might be tricky to work in without introducing other distracting questions, but maybe something to do with the dollar auction game? The central issue is brought about because the second-highest bidder has a large sunk cost.
The central issue is brought about because the second-highest bidder has a large sunk cost.
That game is about credibly committing to match raises. The non-social way is to make one’s incentive to match greater than one’s opponent. The first player can do this by paying 51 or more cents.
The other players can try to signal insanity by continuing, or greater insanity by bidding on top of that, but this is all signalling.
In real life, sunk costs are most important in situations where outcomes are uncertain for reasons other than social. I think betting on who drew the higher card off of a deck, with an ante, raises, calls and folds as in poker, would be better, or something similar.
It might be tricky to work in without introducing other distracting questions, but maybe something to do with the dollar auction game? The central issue is brought about because the second-highest bidder has a large sunk cost.
That game is about credibly committing to match raises. The non-social way is to make one’s incentive to match greater than one’s opponent. The first player can do this by paying 51 or more cents.
The other players can try to signal insanity by continuing, or greater insanity by bidding on top of that, but this is all signalling.
In real life, sunk costs are most important in situations where outcomes are uncertain for reasons other than social. I think betting on who drew the higher card off of a deck, with an ante, raises, calls and folds as in poker, would be better, or something similar.