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When are Agents Negligible?

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Author Info
Wolfgang Pesendorfer
David Levine

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Abstract

We 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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File URL: http://www.kellogg.northwestern.edu/research/math/papers/1018.pdf
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1018.

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Date of creation: Nov 1992
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Handle: RePEc:nwu:cmsems:1018

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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!]
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  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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Cited by:
(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, UCLA Department of Economics. [Downloadable!]
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  2. 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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  3. Michael Waldman, 2004. "Antitrust Perspectives for Durable-Goods Markets," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  4. Ilya Segal, 1998. "Contracting with Externalities," Public Economics 9802002, EconWPA. [Downloadable!]
  5. Hamid Sabourian, 2000. "Bargaining and Markets: Complexity and the Walrasian Outcome," Cowles Foundation Discussion Papers 1249, Cowles Foundation, Yale University. [Downloadable!]
  6. Oliver Hart & John Moore, 1998. "Cooperatives vs. Outside Ownership," NBER Working Papers 6421, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. 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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  8. 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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  9. 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!]
  10. Marco Bassetto & Christopher Phelan, 2006. "Tax riots," Working Paper Series WP-06-04, Federal Reserve Bank of Chicago. [Downloadable!]
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  11. Preston McAfee, 2003. "Capacity Choice Counters the Coase Conjecture," Theory workshop papers 505798000000000046, UCLA Department of Economics. [Downloadable!]
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