Coherent Bidding Strategies and Competitive Behavior

摘要

A competitive sealed bidding decision game is modeled after an asym¬metrically uncertain actual situation. One player knows an asset value for certain, but the other has only a probability distribution on which to act. In addition, both are uncertain regarding each other's bidding strategy.nThe theory of no cooperative two-person nonzero sum games, although useful in providing a structure for the problem, is not helpful because one player's bidding strategy is dependent on the true asset value whereas the other's is not. On the other hand, Bayesian decision theory provides a systematic framework for synthesizing a coherent bidding strategy even when the opponent does not play his "equilibrium strategy." A strategy is termed coherent when the three elements of uncertain asset value, uncertain competitive behavior, and one's own bid are in balance.nThe subjects are a group of businessmen attending a seminar. Through the use of assessed subjective probabilities, each player's actual judgments regarding competitive behavior are taken into account. The bids are found to be largely incoherent and exploitable, although improvement is noted after switching of roles.