I noticed early on that the problem was ambiguous in this respect. Fortunately, for the point made, about the gains from cooperation and defection, it doesn’t matter: all you need is that it’s possible to share in larger gains by cooperating, unless someone defects, and the professor’s reaction to what happened.
You mean as a group they would have gotten the exact same amount of money as they in fact did.
Maybe we should call this the “socialist fallacy”—confusing a group’s total benefit with the “equality” of the outcome for the group’s members.
No, I don’t think that’s what he means. There’s an ambiguity in what is meant by “joint bid” in:
If seven people bid $0.01, does the prof take $0.01 for his $20, or does he take $0.07?
I noticed early on that the problem was ambiguous in this respect. Fortunately, for the point made, about the gains from cooperation and defection, it doesn’t matter: all you need is that it’s possible to share in larger gains by cooperating, unless someone defects, and the professor’s reaction to what happened.
No, that’s not what he means. From the Freakonomics blog post:
So as a group, if seven people bid $0.01, they split $19.93, whereas if under JamesAndrix’s scheme, they’d net $19.99.