Litigation as a Dollar Auction

Abstract

Martin Shubik introduced the dollar auction game in a short paper published in 1971 in The Journal of Conflict Resolution. In the original version of Shubik’s game, an auctioneer auctions off a dollar bill (or other fixed prize) to the highest bidder. In addition, both the highest bidder and the second-highest bidder must pay their respective bids to the auctioneer. Scholars have discovered real-life “dollar auctions” in a wide variety of settings, including mergers and acquisitions, free agency in sports, arms races and patent races, international conflict, and even romance. To this list of real-world applications of the dollar auction, we would add civil litigation. Although some commentators have remarked in passing on the possible parallels between civil litigation and the dollar auction game, in this paper we explore this potential connection in greater detail. In particular, we explain the equivalence between placing a bet and making a bid in the context of litigation.