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An evolutionary analysis of bidding behaviour in fair division games

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  • Werner Güth

    (Max Planck Institute for Collective Goods (Bonn) and LUISS (Rome))

  • Paul Pezanis-Christou

    (School of Economics, University of Adelaide)

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.

Suggested Citation

  • Werner Güth & Paul Pezanis-Christou, 2017. "An evolutionary analysis of bidding behaviour in fair division games," School of Economics and Public Policy Working Papers 2017-12, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2017-12
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    File URL: https://media.adelaide.edu.au/economics/papers/doc/wp2017-12.pdf
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    References listed on IDEAS

    as
    1. Paul Pezanis-Christou & Hang Wu, 2017. "A Naïve Approach to Bidding," School of Economics and Public Policy Working Papers 2017-03, University of Adelaide, School of Economics and Public Policy.
    2. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
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    4. Güth, Werner & Pezanis-Christou, Paul, 2015. "Believing in correlated types in spite of independence: An indirect evolutionary analysis," Economics Letters, Elsevier, vol. 134(C), pages 1-3.
    5. Benny Moldovanu, 2002. "How to Dissolve a Partnership," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(1), pages 66-80, March.
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