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 Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1018.
Date of creation: Nov 1992
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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
Web page: http://www.kellogg.northwestern.edu/research/math/
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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.
- 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.
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- Bagwell, Kyle, 1995.
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Games and Economic Behavior,
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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.
- 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.
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