Elite Warrior

Posts Tagged ‘economics

Dollar Auction

with 3 comments

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.

Advertisements

Written by elitewarrior

March 29, 2009 at 10:56 pm

The Resaon Communism Failed : II

leave a comment »

10. Due to limited amount of resources, the is always a struggle to get it and  Someone will always get greedy enough for sharing it.(Thanks to lupin)
11. Men have an affinity  for their friends, family, acquaintance than for a stranger, that makes commuism in a state to deviate to oligarchism.
12. Monetary Currency
13. Weapon Race
14. Conspiracy from non-communist Capitalist Nations
15. It thinks highly of wisdom of crowd but not that highly of madness of crowd
16. Reluctance of government to move toward pure communism (statelessness)
17. Surplus Value still exists thought the state is communist for cheap labour.
18. Commodity Fetishism remains in the mind of ruling body.

Written by elitewarrior

February 23, 2009 at 11:42 pm

The Resaon Communism Failed

with 2 comments

1. State is run by politicians, not by economists.
2. Leaders confuse the final state of communism(statelessness) with anarchy(not in philosophical sense).
3. Capitalist think they may lose market if communism grows.
4. People prefer short term benefit over a long term benefit.
5. Party rules, commune doesn’t.
6. Proletariat don’t get access to capital anyway.
7. The country embracing communism were poor.
8. Communist ideology always argues for the freedom of a person to think and express in his ways but countries embracing communism never follow that.
9.Communist theory assumes that all humans are basically good, well motivated, and possess equal capabilities and motivation.

To be Continued…

Written by elitewarrior

February 10, 2009 at 12:08 am