The Dollar Auction in Iraq

In comments to this post, Jfaber said:

I think the world would be a better place if neocons would just familiarize themselves with the Dollar Auction from game theory. Sometimes, when you find yourself in a deep hole, continuing to dig may not be an optimal choice.

I know very little about game theory, and hadn't heard of this scenario...so I followed the link. Here's (a portion of) the Wikipedia entry on the Dollar Auction game:

The Dollar auction is a non-zero sum sequential game designed by economist Martin Shubik to illustrate a paradox brought about by traditional rational choice theory in which players with perfect information in the game are compelled to make an ultimately irrational decision based completely on a sequence of rational choices made throughout the game.

The setup involves an auctioneer who volunteers to auction off a dollar bill with the following rule: the dollar goes to the highest bidder, who pays the amount he bids. The second-highest bidder also must pay the highest amount that he bid, but gets nothing in return. Suppose that the game begins with one of the players bidding 1 cent, hoping to make a 99 cent profit. He will quickly be outbid by another player bidding 2 cents, as a 98 cent profit is still desirable. However, a problem becomes evident as soon as the bidding reaches 99 cents. Supposing that the other player had bid 98 cents, they now have the choice of losing the 98 cents or bidding a dollar even, which would make their profit zero. After that, the original player has a choice of either losing 99 cents or bidding $1.01, and only losing one cent. After this point the two players continue to bid the value up well beyond the dollar, and neither stands to profit.

And Jfaber is right: that's exactly where we are in Iraq. We already have a guaranteed loss, even if we 'win' we lose, and the longer we stay in the 'auction' the more we'll end up losing. But we'll stay in it and lose more and more because nobody at the top is prepared to acknowledge that all our losses have been for nothing.

[That's all, folks]