Large Population Aggregative Potential Games

Abstract

We consider population games in which payoff depends upon the aggregate strategy level and which admit a potential function. Examples of such aggregative potential games include the tragedy of the commons and the Cournot competition model. These games are technically simple as they can be analyzed using a one–dimensional variant of the potential function. We use such games to model the presence of externalities, both positive and negative. We characterize Nash equilibria in such games as socially inefficient. Evolutionary dynamics in such games converge to socially inefficient Nash equilibria.