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Representing equilibrium aggregates in aggregate games with applications to common agency

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  • Martimort, David
  • Stole, Lars

Abstract

An aggregate game is a normal-form game with the property that each playerʼs payoff is a function of only his own strategy and an aggregate of the strategy profile of all players. Such games possess properties that can often yield simple characterizations of equilibrium aggregates without requiring that one solves for the equilibrium strategy profile. When payoffs have a quasi-linear structure and a degree of symmetry, we construct a self-generating maximization program over the space of aggregates with the property that the solution set corresponds to the set of equilibrium aggregates of the original n-player game. We illustrate the value of this approach in common-agency games where the playersʼ strategy space is an infinite-dimensional space of nonlinear contracts. We derive equilibrium existence and characterization theorems for both the adverse selection and moral hazard versions of these games.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 76 (2012)
Issue (Month): 2 ()
Pages: 753-772

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Handle: RePEc:eee:gamebe:v:76:y:2012:i:2:p:753-772

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Aggregate games; Common agency games; Supply-function games;

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