Believing in correlated types in spite of independence: An indirect evolutionary analysis

Paul Pezanis-Christou and Werner Güth ()

No 2015-13, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: The risk-neutral equilibrium bidding strategy for first-price auctions with independent private values is justified without assuming a well-defined Bayesian game. Bidders, aware of their own value, assume the private values to be linearly related. The latter, however, are independent and identically distributed, and this is only known by Nature. Allowing for arbitrary linear common value beliefs, and assuming optimal bidding for such beliefs we derive the unique evolutionarily stable conjectural belief and justify risk neutral bidding in a new and hopefully innovative way.

Keywords: Evolutionarily stable strategy; indirect evolution; first-price auction; independent private values; symmetric Bayes-Nash equilibrium. (search for similar items in EconPapers)
JEL-codes: C7 D4 D8 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2015-04
New Economics Papers: this item is included in nep-gth and nep-hpe
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Citations: View citations in EconPapers (7)

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Journal Article: Believing in correlated types in spite of independence: An indirect evolutionary analysis (2015)
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