Question

Now, imagine that you and your friends are given even more money — $100,000 — and are asked to bid on the same car, starting again at $5000. what do you think will happen in this case?

Answer 1

With a larger budget of $100,000, participants are more likely to bid higher for a car starting at $5,000, and the final selling price could exceed the initial price significantly. The perception of fairness and rule changes can also affect bidding strategies.

Step-by-step explanation:

If you and your friends are given $100,000 to bid on a car starting at $5,000, the amount of available money will likely influence the bidding behavior compared to a lower total pot. With a larger amount of money, participants are often willing to bid higher, since the initial price represents a smaller proportion of the total budget.

Thus, the bidding might become more competitive and aggressive, potentially driving the final selling price up significantly beyond the starting price.

Moreover, if bidding behavior is influenced by the perception of fairness and the rules are altered so that refusing an offer allows Player B to keep their share, then Player A is incentivized to make more generous offers to avoid losing their portion.

This scenario mirrors real-life auctions where the dynamics and strategies can shift dramatically based on the total amount of money involved and the rules of the auction.

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