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One Smart Agent

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  • John Sutton
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    Abstract

    This paper proposes an equilibrium concept for a class of games in which players make irreversible costly decisions; these games have been widely used in the recent I.O. literature. The equilibrium concept is defined, not in the space of strategies, but in the space of (observable) outcomes. It is weaker than perfect Nash equilibrium, and involves combining a form of "survivor principle" with an assumption regarding entry. This assumption involves only a very weak rationality requirement: If a profitable opportunity exists in the market, there is "one smart agent" who will fill it. This weak equilibrium concept is sufficient to imply some empirically interesting regularities in the area of market structure.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal RAND Journal of Economics.

    Volume (Year): 28 (1997)
    Issue (Month): 4 (Winter)
    Pages: 605-628

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    Handle: RePEc:rje:randje:v:28:y:1997:i:winter:p:605-628

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    Cited by:
    1. Hui-Ling Chung & Yan-Shu Lin & Jin-Li Hu, 2013. "Bundling strategy and product differentiation," Journal of Economics, Springer, vol. 108(3), pages 207-229, April.
    2. Sugden, Robert, 2009. "Market simulation and the provision of public goods: A non-paternalistic response to anomalies in environmental evaluation," Journal of Environmental Economics and Management, Elsevier, vol. 57(1), pages 87-103, January.
    3. Niu, Shuai, 2013. "The equivalence of profit-sharing licensing and per-unit royalty licensing," Economic Modelling, Elsevier, vol. 32(C), pages 10-14.
    4. Gerben Bakker, 2003. "The decline and fall of the European film industry: sunk costs, market size and market structure, 1890-1927," Economic History Working Papers 22366, London School of Economics and Political Science, Department of Economic History.

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