Aggregate Oligopoly Games with Entry

49 Pages Posted: 21 Jun 2013

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: June 2013

Abstract

We use cumulative reaction functions to compare long-run market structures in aggregative oligopoly games. We first compile an IO toolkit for aggregative games. We show strong neutrality properties across market structures. The aggregator stays the same, despite changes in the number of firms and their actions. The IIA property of demands (CES and logit) implies that consumer surplus depends on the aggregator alone, and that the Bertrand pricing game is aggregative. We link together the following results: merging parties' profits fall but consumer surplus is unchanged, Stackelberg leadership raises welfare, monopolistic competition is the market structure with the highest surplus.

Keywords: aggregative games, contests, Cournot, entry, IIA property, leadership, Logit/CES, mergers, monopolistic competition, oligopoly theory, R&D, strategic substitutes and complements

JEL Classification: D43, L13

Suggested Citation

Anderson, Simon P. and Erkal, Nisvan and Piccinin, Daniel, Aggregate Oligopoly Games with Entry (June 2013). CEPR Discussion Paper No. DP9511, Available at SSRN: https://ssrn.com/abstract=2282965

Simon P. Anderson (Contact Author)

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

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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