[Pat Southern]

Its a lot like a collusive oligopoly. Although each player would be better off if everyone colluded and chose not to addon, thus shifting to close to a monopoly equilibruim (the chips would have the greatest value), by cheating the rest of the colluders through adding on, the player increases his $EV (he gets to buy chips at a cost less than they are worth due to the overlay). Because each player has an incentive to cheat, each individual is trying to increase his own $EV, the collusive oligopoly fails and returns to oligopoly equilibrium.