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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 find it. This weak equilibrium concept is sufficient to imply some empirically interesting regularities in the area of market structure.

Suggested Citation

  • John Sutton, 1995. "One Smart Agent," STICERD - Economics of Industry Papers 08, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stieip:08
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    File URL: https://sticerd.lse.ac.uk/dps/ei/ei8.pdf
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    References listed on IDEAS

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    1. B. Curtis Eaton & Roger Ware, 1987. "A Theory of Market Structure with Sequential Entry," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 1-16, Spring.
    2. Shaked, A, 1982. "Existence and Computation of Mixed Strategy Nash Equilibrium for 3-Firms Location Problem," Journal of Industrial Economics, Wiley Blackwell, vol. 31(1-2), pages 93-96, September.
    3. Avner Shaked & John Sutton, 1990. "Multiproduct Firms and Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 45-62, Spring.
    4. Sutton, John, 1990. "Explaining everything, explaining nothing? : Game theoretic models in industrial economics," European Economic Review, Elsevier, vol. 34(2-3), pages 505-512, May.
    5. Shaked, Avner & Sutton, John, 1987. "Product Differentiation and Industrial Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 131-146, December.
    6. Franklin M. Fisher, 1989. "Games Economists Play: A Noncooperative View," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 113-124, Spring.
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    1. Sutton, John, 1996. "Technology and market structure," European Economic Review, Elsevier, vol. 40(3-5), pages 511-530, April.
    2. John Sutton, 2001. "Rich Trades, Scarce Capabilities: Industrial Development Revisited," STICERD - Economics of Industry Papers 28, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.

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