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One smart agent

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  • Sutton, John

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

  • Sutton, John, 1995. "One smart agent," LSE Research Online Documents on Economics 2053, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:2053
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    File URL: http://eprints.lse.ac.uk/2053/
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    Cited by:

    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.

    More about this item

    Keywords

    equilibrium concept; one smart agent; market structure; games; survivor principle; rationality requirement; regularities.;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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