When Are Agents Negligible?
AbstractWe examine the following paradox: In a dynamic setting, an arbitrarily large finite number of agents adn a continuum of agents can lead to radically different equilibrium outcomes. We show that in a simple strategic setting this paradox is a general phenomenon. We also show that the paradox disappears when there is noisy observation of the players' actions: The aggregate level of noise must disappear as the number of players increases, but not too rapidly. We give several economic examples in which this paradox has recently received attention: the durable goods monopoly, corporate takeovers, and time consistency of optimal governmetn policy.
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Bibliographic InfoPaper provided by David K. Levine in its series Levine's Working Paper Archive with number 96.
Date of creation: 01 Jan 1995
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- Marco Celentani & Wolfgang Pesendorfer, 1992.
"Reputation in Dynamic Games,"
1009, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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- Kyle Bagwell, 1992.
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- 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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