[1] Whoever gets control of the share gets control of the company for one year, and gets dividends based on how well the company did that year. [2] Each person bids based on what they expect they could make. [3] So the highest bidder is the person who can run the company the best, and they can’t be out-bid. [4] So, you get the best possible person to run your company, and they’re incentivized to do their best, so that they get the most money at the end of the year.
[3] doesn’t seem to follow. The person who wins an auction is usually the person who bids the most on it.
Ah, yes, OK. I see I didn’t include a line which I had considered including, [1.5] Assume the players are bidding rationally. (Editing OP to include.) The character is an economist, so it makes sense that this would be a background assumption.
So then, the highest bidder is the person who expects to make the most, which is the person actually capable of making the most.
Of course, you also have to worry about conflict of interest (where someone can extract value from the company by means other than dividends). But if we’re using this as a model of a training process, the decision market is effectively the entire economy.
I don’t know what objection this part is making.
[3] doesn’t seem to follow. The person who wins an auction is usually the person who bids the most on it.
Ah, yes, OK. I see I didn’t include a line which I had considered including, [1.5] Assume the players are bidding rationally. (Editing OP to include.) The character is an economist, so it makes sense that this would be a background assumption.
So then, the highest bidder is the person who expects to make the most, which is the person actually capable of making the most.
Of course, you also have to worry about conflict of interest (where someone can extract value from the company by means other than dividends). But if we’re using this as a model of a training process, the decision market is effectively the entire economy.