Aggregate comparative statics / Daron Acemoglu and Martin Kaae Jensen Acemoglu, Daron; Jensen, Martin Kaae

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Acemoglu, Daron ; Jensen, Martin Kaae
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Games and Economic Behavior
Game theory.; Workshops (Educational programs) -- Comparative analysis; Psychology and mental health
To link to full-text access for this article, visit this link: Byline: Daron Acemoglu, Martin Kaae Jensen Abstract: In aggregative games, each playerE1/4s payoff depends on her own actions and an aggregate of the actions of all the players. Many common games in industrial organization, political economy, public economics, and macroeconomics can be cast as aggregative games. This paper provides a general and tractable framework for comparative static results in aggregative games. We focus on two classes of games: (1) aggregative games with strategic substitutes and (2) nice aggregative games, where payoff functions are continuous and concave in own strategies. We provide simple sufficient conditions under which positive shocks to individual players increase their own actions and have monotone effects on the aggregate. The results are illustrated with applications to public good provision, contests, Cournot competition and technology choices in oligopoly. Author Affiliation: (a) Department of Economics, Massachusetts Institute of Technology, United States (b) Department of Economics, University of Birmingham, United Kingdom Article History: Received 31 August 2011 Article Note: (footnote) [star] We would like to thank Roger Hartley, Jean-Francois Mertens, Alex Possajennikov, Burkhard Schipper, Xavier Vives, an Editor, and three anonymous referees for their helpful remarks and suggestions. Thanks also to seminar participants at the University of Copenhagen, University of Manchester, and at the 2008 Midlands Game Theory Workshop in Birmingham. All remaining errors are of course our responsibility.
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