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

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Listed:
  • Werner Güth

    (Max Planck Institute for Research on Collective Goods
    LUISS)

  • Paul Pezanis-Christou

    (University of Adelaide)

Abstract

We justify risk neutral equilibrium bidding in commonly known fair division games with incomplete information by an evolutionary setup postulating (i) minimal common knowledge, (ii) optimal responses to conjectural beliefs how others behave and (iii) evolutionary selection of conjectural beliefs with fitness measured by expected payoffs. After justifying the game forms we 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 can imply the same bidding behavior as equilibrium analysis based on common knowledge and counterfactual bidding.

Suggested Citation

  • Werner Güth & Paul Pezanis-Christou, 2021. "An indirect evolutionary justification of risk neutral bidding in fair division games," International Journal of Game Theory, Springer;Game Theory Society, vol. 50(1), pages 63-74, March.
    • Handle: RePEc:spr:jogath:v:50:y:2021:i:1:d:10.1007_s00182-020-00739-9
    DOI: 10.1007/s00182-020-00739-9
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    Cited by:

    1. Paul Pezanis-Christou & Hang Wu, 2018. "A non-game-theoretic approach to bidding in first-price and all-pay auctions," School of Economics and Public Policy Working Papers 2018-12, University of Adelaide, School of Economics and Public Policy.

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