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One Smart Agent

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  • John Sutton

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.

Suggested Citation

  • John Sutton, 1997. "One Smart Agent," RAND Journal of Economics, The RAND Corporation, vol. 28(4), pages 605-628, Winter.
  • Handle: RePEc:rje:randje:v:28:y:1997:i:winter:p:605-628
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    Cited by:

    1. Hattori Keisuke & Lin Ming-Hsin, 2011. "Alliance Partner Choice in Markets with Vertical and Horizontal Externalities," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-27, June.
    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. Symeonidis, George, 2003. "Comparing Cournot and Bertrand equilibria in a differentiated duopoly with product R&D," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 39-55, January.
    4. Niu, Shuai, 2013. "The equivalence of profit-sharing licensing and per-unit royalty licensing," Economic Modelling, Elsevier, vol. 32(C), pages 10-14.
    5. Marcella Scrimitore, 2014. "Profitability under Commitment in Cournot and Bertrand Mixed Markets," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(4), pages 684-703, December.
    6. Auriol, Emmanuelle & Schilizzi, Steven G.M., 2015. "Quality signaling through certification in developing countries," Journal of Development Economics, Elsevier, vol. 116(C), pages 105-121.
    7. George Symeonidis, 2008. "Downstream Competition, Bargaining, and Welfare," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(1), pages 247-270, 03.
    8. Auriol, Emmanuelle & Biancini, Sara & Paillacar, Rodrigo, 2015. "Intellectual Property Rights Protection and Trade," CEPR Discussion Papers 10602, C.E.P.R. Discussion Papers.
    9. Tondji, Jean-Baptiste, 2016. "Welfare Analysis of Cournot and Bertrand Competition With(out) Investment in R & D," MPRA Paper 75806, University Library of Munich, Germany, revised 24 Dec 2016.
    10. 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.
    11. Symeonidis, George, 1999. "Cartel stability in advertising-intensive and R&D-intensive industries," Economics Letters, Elsevier, vol. 62(1), pages 121-129, January.
    12. Bakker, Gerben, 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.
    13. Julien Berthoumieu & Viola Lamani, 2016. "Vertical Differentiation, Uncertainty, Product R&D and Policy Instruments in a North-South Duopoly," Working Papers hal-01285559, HAL.

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