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

Werner Güth () and Paul Pezanis-Christou

Economics Letters, 2015, vol. 134, issue C, 1-3

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 risk neutral equilibrium bidding (search for similar items in EconPapers)
JEL-codes: C7 D4 D8 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Believing in correlated types in spite of independence: An indirect evolutionary analysis (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:134:y:2015:i:c:p:1-3

DOI: 10.1016/j.econlet.2015.05.027

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