Indeterminacy and history dependence of strategically interacting players

- Extension of Krugman's (1991) labor market for strategic instead of competitive players.
- Krugman's results carry over to strategic players if sufficiently many participate.
- The cooperative solution exhibits a few non-standard features.
- Indeterminate longrun and transient outcomes are possible even for few players.

This paper considers a finite number of agents populating Krugman's (1991) labor market. The objective is to investigate whether the much emphasized indeterminate outcome is due to the assumption of uncountable many agents, each of measure 0. It is shown that this result extends to n players each with strategic leverage if the social reference includes the own action. This multiplicity results in an open loop setting, which renders in almost all other cases a unique intertemporal Nash equilibrium. Finally, the cooperative solution exhibits non-standard features: the possibility of converging to the (stationary inferior) agricultural equilibrium and that is due to an unstable node while an unstable spiral can render the unique outcome of full industrialization.