An Indirect Evolutionary Justification of Risk Neutral Bidding in Fair Division Games

8 Pages Posted: 26 Jun 2019

See all articles by Werner Guth

Werner Guth

Max Planck Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Paul Pezanis-Christou

U. of Adelaide School of Economics

Date Written: April 13, 2019

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 can imply the same bidding behavior as equilibrium analysis based on common knowledge and counterfactual bids.

Keywords: Fair division games, First-and Second-price formats, risk neutrality, indirect evolutionary analysis

JEL Classification: C72, C73, D44, D45, D74

Suggested Citation

Güth, Werner and Pezanis-Christou, Paul, An Indirect Evolutionary Justification of Risk Neutral Bidding in Fair Division Games (April 13, 2019). Available at SSRN: https://ssrn.com/abstract=3408381 or http://dx.doi.org/10.2139/ssrn.3408381

Werner Güth

Max Planck Institute of Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Paul Pezanis-Christou (Contact Author)

U. of Adelaide School of Economics

Adelaide
Australia

Register to save articles to
your library

Register

Paper statistics

Downloads
1
Abstract Views
52
PlumX Metrics