Prisoner's Dilemma

Considering the Prisoner’s Dilemma in this chapter, provide your own insight on how sites such as eBay “work” for most participants of this popular online auction site. Do they really work? Or is there too much risk?

In a way, auction sites like ebay, are very much like the Prisoner’s Dilemma. The way ebay works is that a person decides that they want to sell something so they create an auction listing. After that, hundreds of potential buyers look at the listing and decide to bid on it. The person with the highest bid obviously wins and receives an email from the seller. This can relate to the Prisoner’s Dilemma because people making bids cannot communicate with one another, this way they may not put a whole lot of trust in one another. There are different possibilities that the bidders can consider:

1. Everyone bids within a reasonable price range, and the highest bid wins,
2. Everyone bids quite low, and the highest bid wins, or
3. Everyone bids within a very high price range, and the highest bid wins.

The Prisoner’s dilemma assumes that people don’t trust each other causing the worst outcome which in this case would be number 3. If someone really wants an item, they will place a very high bid thinking others will do the same. If people don’t trust one another, the bids could keep getting higher and higher until the item is extremely expensive. This is a lose-lose situation because nobody gets the item, and the person who does, spends a lot of money - maybe more than it’s actually worth, depending on the quality of it. I have never personally bought or sold anything on ebay so I’m a little unsure how the site actually works, but if this dilemma is the case then it seems a little risky. From what I’ve heard, I think that the site works, but I’m sure there are events where the bidding gets out of control and people spend more money than they intend to.