An evolutionary analysis of bidding behaviour in fair division games

Werner Güth () and Paul Pezanis-Christou
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Werner Güth: Max Planck Institute for Collective Goods (Bonn) and LUISS (Rome)
Authors registered in the RePEc Author Service: Werner Güth ()

No 2017-12, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: We justify risk neutral equilibrium bidding in commonly known fair division games with incomplete information and counterfactual considerations via (i) optimally responding to individual conjectural beliefs concerning other bidders' behavior, what avoids counterfactual bidding, and (ii) determining the evolutionarily stable conjectural beliefs when fitness is measured by expected payoffs, what does not require common knowledge. Compared to auctions, fair division games feature interactive bidding contests in closed groups due to sharing the sales price equally among bidders. We axiomatically justify the game forms of first- and second-price fair division games, the former (latter) being over-bidding (under-bidding) proof, and we provide a condition for evolutionarily stable bidding to coincide with equilibrium bidding irrespectively of the number of bidders.

Date: 2017-10
New Economics Papers: this item is included in nep-des, nep-evo, nep-exp, nep-gth, nep-hpe and nep-mic
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