Question

There are 35 students in this class. Suppose I were to auction off a $100 bill. Each of you will bid by placing your bid in an envelope, in cash. I will keep all of the money collected from the bids, but will give the $100 bill to the high bidder. If there is a tie I will randomly determine who receives the money.

Will I profit? Will I break even? Will I lose money?

Why? Consider your incentive as a bidder, and the incentives that every other classmate has as well.

Note: This is what is called an all-pay auction. It is important to understand in context of Tullock's Cost of Monopololies, Tariffs, and Theft.

Answer 1

As there are about 35 student in my class and everyone will bid the money for bill auction in an envelop which make the bidding more random and it is very uncertain to get the $100 bill .There are 33.33% in each that i will get profit or have a break even or i will lose money and as there is 33.33 % that i will lose money which is less than 50% .means bidding on the $100 bill with a bid amount of $50-$100 or more can make me get the $100 bill in that way i c will have profit of $100 bill if get the auction else will have a break even in tie situation .

Have a good day !