When are Agents Negligible?
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.
Year of publication: |
1992-11
|
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Authors: | Pesendorfer, Wolfgang ; Levine, David |
Institutions: | Center for Mathematical Studies in Economics and Management Science (CMS-EMS), Kellogg Graduate School of Management |
Saved in:
freely available
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