Toward a study of bidding processes some constant‐sum games

The study of bidding has presented both economics and psychology with a host of as yet unresolved problems. The lack of understanding of these problems has been manifested in the difficulties confronting policy‐makers in the framing of laws to deal with collusive or restrictive practices in bidding under various market mechanisms. On the one hand, a theory of competitive behavior may call for all competitors to charge the same price for the same product, yet the submission of identical bids may, in fact, be a criterion of collusion. This paper, the first of a series on bidding, gives a general and preliminary discussion of several of the factors entering into the construction of models of the bidding process. Following this discussion, a number of bidding situations, formulated as two‐person constant‐sum games are examined. A number of open questions, suggested during the investigation of such games. are mentioned. Succeeding papers will be devoted to the more important cases of bidding models formulated as non‐constant‐sum games, both for single‐shot bids and for sequences of bids.