Elite Warrior

Archive for March 2009

Dollar Auction

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It was proposed by economist economist Martin Shubik. It illustrates a paradox brought about by traditional rational choice theory in which players with perfect information in the game are compelled to make an ultimately irrational decision based completely on a sequence of rational choices made throughout the game.
Dollar auction is an all pay auction having two player. The auction is for a dollar bill. The
game begins with one of the players bidding 1 cent, hoping to make a 99 cent profit. The second player will quickly bid 2cents, as a 98 cent profit is still desirable. Again,first bidder bids 3 cents,converting his loss of 1 cent into a gain of 97 cents. In this way, a series of bids is maintained. However, a problem becomes visible the moment bidding reaches 99 cents. Supposing that the other player had bid 98 cents, he now has the choice of losing the 98 cents or bidding a dollar even, which would make his  profit zero. After that, the first player has a choice of either losing 99 cents or bidding $1.01, and only losing one cent. After this point the two players continue to bid the value up well beyond the dollar, and neither stands to profit.The game actually has no equilibrium, as two rational players in this game could theoretically lose all of their money to the auctioneer. Both players stand to lose money, but the winning bidder loses about 99 cents less than the losing bidder.
To end the bidding war a bidder can bid 99 cents more than the previous bid, leaving no bid that offers a potentially higher profit (or smaller loss). (For example, Bidder 1 bids $x, Bidder 2 bids $x + $0.99. If Bidder 1 were to bid $x + $0.99 + $0.01, he would be bidding to pay $x + $0.99 + $0.01 for a prize of $1, or a total loss of $x– the same as if he had not increased his previous bid.) As a special case of this, if the first bidder immediately bids $0.99, he will not be outbid by the other bidder, who has no potential to make a profit. The first bidder will earn $0.01 in profit and the second bidder will pay nothing and win nothing.

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Written by elitewarrior

March 29, 2009 at 10:56 pm

Back into business

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Friends,
Throughout the March month, I have been ill and was not able to update the posts.
Now I am back from hospital and feeling well, I will be continuing my posts.

Written by elitewarrior

March 29, 2009 at 3:53 pm

Posted in Uncategorized

The problem with Logic

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A Harvard scholar, Mr. Sean Goldstein approaches a learned Rabbi telling him that he has a Doctorate in philosophy, and would now like to learn the Talmud to round off or complete his knowledge. After summing him up for a few minutes, the Rabbi told him ” I seriously doubt that you are ready to study Talmud. Its the deepest book of our people. If you wish however I am willing to examine you in logic, and if you pass the test I will teach you Talmud. “The young man agrees. Rabbi holds up two fingers ” Two men come down a chimney. One comes with a clean face and the other comes out with a dirty face. Which one washes his face? 
The young man stares at the Rabbi. ” Is that a test in Logic?  The Rabbi nods. 

” The one with the dirty face washes his face” He answers wearily. 
” Wrong. The one with the clean face washes his face. Examine the simple logic. The one with the dirty face looks at the one with theclean face and thinks his face is clean. The one with the clean face looks at the one with the dirty face and thinks his face is dirty. So the one with the clean face washes his face.” 
“Very clever” Says Goldstein. . ” Give me another test.” 
The Rabbi again holds up two fingers ” Two men come down a chimney. One comes out with a clean face and the other comes out with a dirty face. which one washes his face? 
” We have already established that. The one with the clean face washes his face” 
” Wrong. Each one washes his face. Examine the simple logic. The one with the dirty face looks at the one with the clean face and thinks his face is clean. The one with the clean face looks at the one with the dirty face and thinks his face is dirty. So the one with the clean face washes his face. When the one with the dirty face sees the one with the clean face washing his face, he also washes his face. So each one washes his face” 
” I didn’t think of that! ” Says Goldstein. ” Its shocking to me that I could make an error in logic. Test me again!.” 
The Rabbi holds up two fingers ” Two men come down a chimney. One comes out with a clean face and the other comes out with a dirty face. Which one washes his face? 
” Each one washes his face” 
” Wrong. Neither one washes his face. Examine the simple logic. The one with the dirty face looks at the one with the clean face andthinks his face is clean. The one with the clean face looks at the one with the dirty face and thinks his face is dirty. But when the one with clean face sees that the one with the dirty face doesn’t wash his face, he also doesn’t wash his face So neither one washes his face” 
Goldstein is desperate. ” I am qualified to study Talmud. Please give me one more test” 
He groans when the Rabbi lifts his two fingers “Two men come down a chimney. One comes out with a clean face and the other comes out with 
a dirty face. Which one washes his face? 

” Neither one washes his face” 
” Wrong. Do you now see, Sean, why Socrates logic is an insufficient basis for studying the Talmud? Tell me, how is it possible for two men to come down the same chimney, and for one to come out with a clean face and the other with a dirty face? Dont you see? The whole question is narishkeit – foolishness – and if you spend your life trying to answers foolish questions, all your answers will be foolish.”


Disclaimer: I do not own this story. I don’t know if some one is copyright holder for this story. If someone has copyright for this story please contact me at limit[dot]dgp[at]gmail[dot]com so that I could show the credit or remove the post.

Written by elitewarrior

March 16, 2009 at 11:00 pm

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Twitter is blocked

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For friends, twitter is blocked in my company so will not be available anymore

fsck

Written by elitewarrior

March 16, 2009 at 11:26 am

Posted in Uncategorized

The Winner’s Curse

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This phenomenon is known as Winner’s Curse. Let us take an example and then we will talk on it.

A teacher comes in a room with coin filled in a glass jar.The  teacher gives option to the student to guess for the total amount of money, the guy guessing largest amount of money will be getting the jar for that price. Almost more than 60% of the student will be bidding for nearest value of the sum in jar adhering to wisdom of crowd and some will bid for quite lesser than the actual sum and some will go for more than the actual sum. The guy winning the bid has paid more than the item auctioned values. The winner always gets the feeling that he overpaid.

First of all, let’s see what common value auction means. Common value auction is the type of auction where the item has got a fixed value for all participant for example a 8-GB USB drive. Its market value is fixed and costs equal for all. So, when in auction most of the people will be bidding near the market value but the guy winning the bid must be bidding higher than other fellows i.e. higher than its market price. So, after getting the product he gets a felling that he could have bought it in lesser price in market.So, it becomes a losing situation.

If the auction is not common value auction then there is different situation. Lets take example for bidding of bat-mask and bat-belt. I am a bat man fan so I could want to buy it for $150 but for one of my friend who doesn’t like batman at all it could have a value of less than $10. So , in this case, the winner is not necessarily loser. One of the way to avoid winner’s curse is to bid closets to market price.

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Written by elitewarrior

March 15, 2009 at 11:12 pm

Posted in The Almighty Buck

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