Aggregative Games with Entry1

Aggregative games are used to model strategic interaction in many …elds of economics, including industrial organization, political economy, international trade, and public …nance. In such games, each player’s payo¤ depends on his/her own actions and an aggregate of all player’s actions. Examples in industrial organization are the Cournot oligopoly model, logit and CES di¤erentiated products Bertrand models (and linear demand models in the short run), and R&D games. We suppose a change a¤ects some of the players, such as cost shocks (subsidies, tari¤s), privatization, and a merger or RJV. In a unifying framework, we determine the impact of the change on the aggregate variable, producer surplus and consumer surplus under free entry. We also show that the IIA property of demands implies that consumer surplus depends on the aggregate alone, and the corresponding Bertrand pricing game is aggregative. JEL Classi…cations: D43, L13