Aggregative Games and Oligopoly Theory : Short-run and Long-run Analysis

We compile an IO toolkit for aggregative games and use inclusive best reply functions to deliver oligopoly comparative statics and ranking of firms' actions and profits. Aggregative games apply to additively separable direct and indirect preferences, as well as generalized quadratic forms. Theaggregative game structure delivers immediate consumer welfare results if demand functions have the IIA property. We close the model with a monopolistically competitive fringe to show strong neutrality properties for long-run equilibria. These properties underscore a unifying principle in theliterature on merger analysis, privatization, Stackelberg leadership, and cost shocks