When Are Agents Negligible?
AbstractThe 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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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 85 (1995)
Issue (Month): 5 (December)
Other versions of this item:
- David K. Levine & Wolfgang Pesendorfer, 1995. "When Are Agents Negligible?," Levine's Working Paper Archive 96, David K. Levine.
- Wolfgang Pesendorfer & David Levine, 1992. "When are Agents Negligible?," Discussion Papers 1018, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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.:
- V.V. Chari & Patrick J. Kehoe, 1989.
122, Federal Reserve Bank of Minneapolis.
- Marco Celentani & Wolfgang Pesendorfer, 1992.
"Reputation in Dynamic Games,"
1009, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Celentani, Marco & Pesendorfer, Wolfgang, 1996. "Reputation in dynamic games," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/4816, Universidad Carlos III de Madrid.
- Kyle Bagwell, 1992.
"Commitment and Observability in Games,"
1014, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- 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.
- Nabil Al-Najjar, 1992. "The Coase Conjecture in Markets with a Finite Number of Consumers," Cahiers de recherche du DÃ©partement des sciences Ã©conomiques, UQAM 9211, Université du Québec à Montréal, Département des sciences économiques.
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