Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/221375 
Year of Publication: 
1992
Series/Report no.: 
Discussion Paper No. 1018
Publisher: 
Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science, Evanston, IL
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.
Document Type: 
Working Paper

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