How To Auction $100 & Make 2-5x Your Money

While studying at Harvard Business School, one of my professors presented a simple auction that produces stunning results. The auction was for a standard US $100 note and the rules are simple.

$100 Auction Rules

  1. Silence is in effect (to prevent side agreements and coalitions forming)
  2. Real money (both bids and winnings)
  3. The first bid must be $5, and bids go up $5 at a time
  4. You cannot bid twice in a row
  5. Highest bidder pays their bid and gets the $100
  6. Second-highest bidder pays their bid and gets nothing in return

Where do you think the bidding finished?

I should note that the Harvard classroom comprised smart individuals including CEOs, senior managers, physicists, aeronautical engineers, investment bankers, asset managers, etc.

So, where did the bidding finish? US$240. If you calculate the numbers, the professor sold a $100 bill for $240 and made $375 ($240 – $100 + $235) in a few minutes. We later learned that the professor’s average highest bid for this auction is between $200 and $500, and has at times exceeded $2000.

If you find yourself at a function with at least 8 – 10 people, give this experiment a try and see the results.