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When Are Agents Negligible?

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Author Info
Levine, David K
Pesendorfer, Wolfgang

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Abstract

The authors examine the following paradox: in a dynamic setting, equilibria can be radically different in a model with a finite number of agents than in a model with a continuum of agents. They present a simple strategic setting in which this paradox is a general phenomenon. However, the paradox disappears when there is noisy observation of the players' actions and the aggregate level of noise does not disappear too rapidly as the number of players increases. The authors give several economic examples in which this paradox has recently received attention: durable-goods monopoly, corporate takeovers, and time consistency of optimal government policy. Copyright 1995 by American Economic Association.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 85 (1995)
Issue (Month): 5 (December)
Pages: 1160-70
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Handle: RePEc:aea:aecrev:v:85:y:1995:i:5:p:1160-70

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Marco Celentani & Wolfgang Pesendorfer, 1992. "Reputation in Dynamic Games," Discussion Papers 1009, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  2. Kyle Bagwell, 1992. "Commitment and Observability in Games," Discussion Papers 1014, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  3. Bagnoli, Mark & Salant, Stephen W & Swierzbinski, Joseph E, 1989. "Durable-Goods Monopoly with Discrete Demand," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1459-78, December. [Downloadable!] (restricted)
  4. Nabil Al-Najjar, 1992. "The Coase Conjecture in Markets with a Finite Number of Consumers," Cahiers de recherche du Département des sciences économiques, UQAM 9211, Université du Québec à Montréal, Département des sciences économiques.
  5. Chari, V V & Kehoe, Patrick J, 1990. "Sustainable Plans," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 783-802, August. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Drew Fudenberg & David K. Levine & Wolfgang Pesendorfer, 1996. "When are Non-Anonymous Players Negligible," Levine's Working Paper Archive 180, David K. Levine. [Downloadable!]
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  2. Ilya Segal, 1998. "Contracting with Externalities," Public Economics 9802002, EconWPA. [Downloadable!]
  3. Oliver Hart & John Moore, 1998. "Cooperatives vs. Outside Ownership," NBER Working Papers 6421, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Jonathan Hamilton & Steven Slutsky, 2003. "Nonlinear Price Discrimination with a Finite Number of Consumers and Constrained Recontracting," Levine's Bibliography 234936000000000074, UCLA Department of Economics. [Downloadable!]
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  5. Marco Bassetto, 2000. "A Game-Theoretic View of the Fiscal Theory of the Price Level," Econometric Society World Congress 2000 Contributed Papers 1492, Econometric Society. [Downloadable!]
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  6. Giancarlo Corsetti & Amil Dasgupta & Stephen Morris & Shin, Hyun, 2000. "Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders," Cowles Foundation Discussion Papers 1273, Cowles Foundation, Yale University. [Downloadable!]
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  7. Michael Waldman, 2004. "Antitrust Perspectives for Durable-Goods Markets," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  8. Hamid Sabourian, 2000. "Bargaining and Markets: Complexity and the Walrasian Outcome," Cowles Foundation Discussion Papers 1249, Cowles Foundation, Yale University. [Downloadable!]
  9. Robert Zeithammer, 2009. "Commitment in sequential auctioning: advance listings and threshold prices," Economic Theory, Springer, vol. 38(1), pages 187-216, January. [Downloadable!] (restricted)
  10. Weintraub, Gabriel Y. & Benkard, C. Lanier & Van Roy, Benjamin, 2007. "Markov Perfect Industry Dynamics with Many Firms," Research Papers 1919r, Stanford University, Graduate School of Business. [Downloadable!]
  11. Gabriele Camera & Marco Casari, 2007. "Cooperation among strangers: an experiment with indefinite interaction," Purdue University Economics Working Papers 1201, Purdue University, Department of Economics. [Downloadable!]
  12. Marco Bassetto & Christopher Phelan, 2006. "Tax riots," Working Paper Series WP-06-04, Federal Reserve Bank of Chicago. [Downloadable!]
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  13. Preston McAfee, 2003. "Capacity Choice Counters the Coase Conjecture," Theory workshop papers 505798000000000046, UCLA Department of Economics. [Downloadable!]
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