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Aggregate Comparative Statics

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  • Acemoglu, Daron
  • Jensen, Martin Kaae

Abstract

In aggregative games, each player's payoff depends on her own actions and an aggregate of the actions of all the players (for example, sum, product or some moment of the distribution of actions). Many common games in industrial organization, political economy, public economics, and macroeconomics can be cast as aggregative games. In most of these situations, the behavior of the aggregate is of interest both directly and also indirectly because the comparative statics of the actions of each player can be obtained as a function of the aggregate. In this paper, we provide a general and tractable framework for comparative static results in aggregative games. We focus on two classes of aggregative games: (1) aggregative of 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. We show how this framework can be applied to a variety of examples and how this enables more general and stronger comparative static results than typically obtained in the literature.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7254.

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Date of creation: Apr 2009
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Handle: RePEc:cpr:ceprdp:7254

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Keywords: aggregative games; contests; oligopoly; robust comparative statics; strategic substitutes;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. “Aggregate Comparative Statics,” D. Acemoglu & M. K. Jensen (2011)
    by afinetheorem in A Fine Theorem on 2012-09-19 08:57:01
  2. “Aggregate Comparative Statics,” D. Acemoglu & M. K. Jensen (2011)
    by afinetheorem in A Fine Theorem on 2012-09-19 08:57:01
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Cited by:
  1. Garfinkel , Michelle & Skaperdas, Stergios & Syropoulos, Constantinos, 2012. "Trade and Insecure Resources: Implications for Welfare and Comparative Advantage," School of Economics Working Paper Series 2012-8, LeBow College of Business, Drexel University.
  2. Roy, Sunanda & Sabarwal, Tarun, 2010. "Characterizing Stability Properties in Games with Strategic Substitutes," Staff General Research Papers 32009, Iowa State University, Department of Economics.
  3. Martimort, David & Stole, Lars, 2012. "Representing equilibrium aggregates in aggregate games with applications to common agency," Games and Economic Behavior, Elsevier, vol. 76(2), pages 753-772.
  4. Tobias Harks & Philipp von Falkenhausen, 2013. "Quantitative Comparative Statics for a Multimarket Paradox," Papers 1307.5617, arXiv.org, revised Dec 2013.
  5. Peter Neary, 2009. "Two and a Half Theories of Trade," Economics Series Working Papers 466, University of Oxford, Department of Economics.
  6. Andrew Monaco & Tarun Sabarwal, 2012. "Games with Strategic Heterogeneity," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201240, University of Kansas, Department of Economics, revised Nov 2012.
  7. Daron Acemoglu & Martin Kaae Jensen, 2012. "Robust Comparative Statics in Large Dynamic Economies," Levine's Working Paper Archive 786969000000000507, David K. Levine.
  8. Andrew Monaco & Tarun Sabarwal, 2012. "Monotone Comparative Statics in Games with both Strategic Complements and Strategic Substitutes," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201236, University of Kansas, Department of Economics, revised Aug 2012.
  9. Martimort, David & Stole, Lars, 2011. "Aggregate Representations of Aggregate Games," MPRA Paper 32871, University Library of Munich, Germany.
  10. Schroyen, Fred & Treich, Nicolas, 2013. "The Power of Money: Wealth Effects in Contests," Discussion Paper Series in Economics 13/2013, Department of Economics, Norwegian School of Economics.
  11. Grigoriadis, Theocharis, 2013. "A political theory of Russian orthodoxy: Evidence from public goods experiments," Discussion Papers 2013/14, Free University Berlin, School of Business & Economics.
  12. Martin Kaae Jensen, 2012. "Distributional Comparative Statics," Discussion Papers 12-08, Department of Economics, University of Birmingham.

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