Brexit: Bidding for a Dollar

There is a famous game, at least amongst economists, known as “Bidding for a Dollar”. In this game, players participate in an auction for a dollar bill. The bill goes to the winner, who therefore stands to make a profit if their winning bid is less than $1. However, the bidder who comes second has to pay over the amount of their final losing bid.

The game starts off sensibly enough with bids of 5, 10, 15, 20 cents and so on, with the participants trying to land the winning bid and maximise their profit. However, as the bids mount and approach $1, it begins to dawn on the players that the best they can hope for is to make a very small profit. However, the second highest bidder realises that dropping out now means that they will lose money. That is hard to accept, so the bidding continues until the highest bid stands at $1.

If they hadn’t realised it before, this is the moment when the participants work out that this is a “no-win” game and continuing to play now guarantees a loss. However, having started, it still makes sense to keep on bidding and so a bid of $1.10 is placed. Better to lose 10 cents than a $1.

It seems to me that this is the point that the UK has arrived at in the Brexit negotiations. We spent the first two years after the Referendum with the different Brexit factions squabbling over the “Brexit dividend”, or which faction was going to get what share of the dollar bill. Reality has now dawned that there isn’t any Brexit dividend and the factions are now desperately trying to minimise their losses and make sure the blame for this fiasco lands somewhere else.

The only smart strategy for playing the “Bidding for a Dollar” game is not to start playing at all. The Brexit equivalent is to jump in a time machine and stop Theresa May triggering Article 50. The latest polls seem to indicate the British public has rather belatedly worked this out (“Two-thirds of the public now think the outcome of Brexit negotiations will be bad for Britain”).

Let’s hope someone knows where to find that time machine.