On the Natural Selection of Market Choice

An evolutionary approach to the problem of economic mechanism choice is presented. It demonstrates the power that a single participant has on the choice of a preferred market mechanism. A population of sellers, each with one of two possible economic mechanisms, facing potential buyers, is presented as a test model. It is shown that if two auctions, such as first- and second-price auctions, are to attract an identical number of buyers, although under the model assumptions their expected revenues are identical, sellers using a first-price auction mechanism will be selected for. However, if a second-price auction attracts one additional buyer, then it will be selected for by the evolutionary process. These results are extended to the choice between an arbitrary k- and l-price auctions.

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