Fairness In The Double Auction Game

Referring to one of the most fashionable concepts in the behavioral management,we address fairness concern in the standard two-player double auction game. Unlikethe utility function quoted in other’s work with the same setting, we employ adifferent formation of utility function which assumes that the player’s inequityaversion is aroused by the difference between his expected profit and his belief aboutthe opponent’s expected profit. We also assume that both players adopt a commonpiecewise linear pricing strategy which guarantee them a positive profit/utility. Underthis assumption, we find a unique Bayesian Nash Equilibrium. Specifically, theequilibrium strategy requires that both players offer a single price regardless of theirprivate values. Furthermore, we prove that this kind of strategy is ex post inefficientand the fair-minded concern will cause detrimental effect in terms of both tradingefficiency and ex ante expected total utility.