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An indirect evolutionary justification of risk neutral bidding in fair division games

Paul Pezanis-Christou () and Werner Güth ()
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Werner Güth: Max Planck Institute for Research on Collective Goods (Bonn) and LUISS (Rome)

Authors registered in the RePEc Author Service: Werner Güth ()

No 2018-09, School of Economics Working Papers from University of Adelaide, School of Economics

Abstract: We justify risk neutral equilibrium bidding in commonly known fair division games with incomplete information in an evolutionary setup by postulating (i) minimal common knowledge assumptions, (ii) optimally responding agents to conjectural beliefs about how others behave and (iii) evolution of conjectural beliefs with fitness measured by expected payoffs. We axiomatically justify the game forms, derive the evolutionary games for first- and second-price fair division and determine the evolutionarily stable conjectures. The latter coincide with equilibrium bidding, irrespectively of the number of bidders, i.e., heuristic belief adaptation implies the same bidding behavior as equilibrium analysis based on common knowledge and counterfactual bids.

New Economics Papers: this item is included in nep-evo, nep-exp, nep-gth and nep-hpe
Date: 2018-07
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Persistent link: https://EconPapers.repec.org/RePEc:adl:wpaper:2018-09

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