I recently faced a dilemma with a group of friends in which auction theory provided a nice solution to ensure everyone's satisfaction. Due to its elegance and potential application to similar coordination problems, I detail the solution below as well as some intuition for why it works.
Scenario
You and n−1 friends are traveling to Spain next week. Due to unforeseen circumstances, the hotel is booked for only n−1 people, hence one person must find other housing. However, because of the short-term notice as well as money constraints, the only option is a hostel where that person must live with others they do not know. No one in the group is eager to live in the hostel as... (read 886 more words →)