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Expectational stability in aggregative games

Author

Listed:
  • Richard Cornes

    (Australian National University)

  • Luciana C. Fiorini

    (University of Western Australia)

  • Wilfredo L. Maldonado

    (Federal University of Goiás)

Abstract

In aggregative games individuals’ payoffs depend on players’ own contributions (or strategies) and on the aggregate contribution of other players. The replacement function, which defines the optimal contribution of a player in an aggregate contribution, is a convenient tool to analyze aggregative games. In this paper, the replacement function is used to define an adjustment process of expectations with respect to the aggregate strategy of the game. The Nash equilibrium of the game is interpreted as the rational expectations equilibrium (REE) of the dynamical system defined by that adjustment process. The expectational stability of the REE is analyzed and its local stability is characterized in terms of the fundamentals and the REE itself. Stronger results of global stability can be obtained when the model is applied to specific aggregative games with explicit payoff functions. Examples of Cournot oligopoly and public goods provision games are presented to illustrate global stability.

Suggested Citation

  • Richard Cornes & Luciana C. Fiorini & Wilfredo L. Maldonado, 2021. "Expectational stability in aggregative games," Journal of Evolutionary Economics, Springer, vol. 31(1), pages 235-249, January.
    • Handle: RePEc:spr:joevec:v:31:y:2021:i:1:d:10.1007_s00191-020-00664-w
    DOI: 10.1007/s00191-020-00664-w
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    References listed on IDEAS

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    1. Desgranges, Gabriel & Gauthier, Stéphane, 2016. "Rationalizability and efficiency in an asymmetric Cournot oligopoly," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 163-176.
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    Cited by:

    1. Luciana C. Fiorini & Wilfredo L. Maldonado, 2022. "Labor Supply in Pandemics Environments: An Aggregative Games Approach," Working Papers, Department of Economics 2022_18, University of São Paulo (FEA-USP).

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    More about this item

    Keywords

    Aggregative games; Expectational stability; Eductive learning;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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