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Well, for one, it's ironic that Smiley looses because Dan'l Webster really IS the better jumping frog, but probably you are referring to the DRAMATIC IRONY element here.
One form of dramatic irony occurs when the reader knows something the characters do not. We know that the stranger has cheated by filling up Dan'l Webster with birdshot so that he is too heavy to jump. But Smiley doesn't realize this until he has lost and the stranger leaves with his money.
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