Aggregative Games and Oligopoly Theory: Short-run and Long-run Analysis

51 Pages Posted: 11 Oct 2018

See all articles by Simon P. Anderson

Simon P. Anderson

University of Virginia - Department of Economics

Nisvan Erkal

University of Melbourne - Faculty of Business and Economics

Daniel Piccinin

Brick Court Chambers

Date Written: July 21, 2018

Abstract

We compile an IO toolkit for aggregative games and use inclusive best reply functions to deliver oligopoly comparative statics and ranking of firms' actions and profits. Aggregative games apply to additively separable direct and indirect preferences, as well as generalized quadratic forms. The aggregative game structure delivers immediate consumer welfare results if demand functions have the IIA property. We close the model with a monopolistically competitive fringe to show strong neutrality properties for long-run equilibria. These properties underscore a unifying principle in the literature on merger analysis, privatization, Stackelberg leadership, and cost shocks.

Keywords: Aggregative Games, Comparative Statics, Oligopoly Theory, Monopolistic Competition, Entry, Strategic Substitutes and Complements, IIA Property, Additively Separable Direct and Indirect Utility Functions, Logit/CES; Mergers, Cournot

JEL Classification: D43, L13

Suggested Citation

Anderson, Simon P. and Erkal, Nisvan and Piccinin, Daniel, Aggregative Games and Oligopoly Theory: Short-run and Long-run Analysis (July 21, 2018). Available at SSRN: https://ssrn.com/abstract=3251127 or http://dx.doi.org/10.2139/ssrn.3251127

Simon P. Anderson

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States
804-924-3861 (Phone)
804-982-2904 (Fax)

Nisvan Erkal (Contact Author)

University of Melbourne - Faculty of Business and Economics ( email )

Victoria, 3010
Australia
+61 3 8344 3307 (Phone)
+61 3 8344 6899 (Fax)

HOME PAGE: http://www.nisvanerkal.net

Daniel Piccinin

Brick Court Chambers ( email )

7 - 8 Essex St.
London, WC2R 3LD
United Kingdom

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