Question: Consider the auction for a dollar where there are two bidders. Each bidder can bid 5 cents or multiples of 5 cents each time. The

Consider the auction for a dollar where there are two bidders. Each bidder can bid 5 cents or multiples of 5 cents each time. The dollar will go to the bidder with the highest bid, but the second-highest bidder will also have to pay his bid to the auctioneer. The auction ends when neither player wants to make a higher bid or the bidding reaches $2, whichever occurs first. Explain how one of the bidders could pay more than one dollar for a one-dollar bid. Can you find the Nash equilibrium in this game?

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