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Two‐Aggregate Games: Demonstration Using a Production–Appropriation Model

Richard Cornes, Roger Hartley and Yuji Tamura

Scandinavian Journal of Economics, 2019, vol. 121, issue 1, 353-378

Abstract: We expand the scope of the two‐aggregate method by applying it to a situation in which many heterogeneous players are free to contribute to both aggregates. Such situations naturally arise in various resource allocation problems. Hence, our method is useful in many applications. A production–appropriation model is employed to illustrate how the problem of establishing the Nash equilibrium can be reduced from solving n>2 best‐response functions in n unknowns to solving two consistency conditions in two unknowns. We then conduct a comparative static exercise that the conventional approach could not handle easily, if at all, to demonstrate the power of our method.

Date: 2019
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https://doi.org/10.1111/sjoe.12257

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Working Paper: Two-aggregate games: Demonstration using a production-appropriation model (2017) Downloads
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Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten

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