Against typical human opponents it is not rational to join dollar auctions either as the second player or as the first, because of the known typical behavior of humans in this game.
The equilibrium strategy however is a mixed strategy, in which you pick the maximum bid you are willing to make at random from a certain distribution that has different weights for different maximum bids. If you use a the right formula, your opponents won’t have any better choice than mirroring you, and you will all have an expected payout of zero.
Against typical human opponents it is not rational to join dollar auctions either as the second player or as the first, because of the known typical behavior of humans in this game.
The equilibrium strategy however is a mixed strategy, in which you pick the maximum bid you are willing to make at random from a certain distribution that has different weights for different maximum bids. If you use a the right formula, your opponents won’t have any better choice than mirroring you, and you will all have an expected payout of zero.