Implementation of Richardson's Arms Race Model in Advertising Expenditure of Two Competitive Firms

The purpose of this study is the implementation of some of the most widely known mathematical theories of war in firms. During World War II mathematical models in military operations were widely used. Through this process operational research was created. In this specific research, Lewis Richardson’s arms race model was examined. This particular mathematical model was based on differential equations and its main purpose was to explain the course of the cost of equipment of two warring states. The environment in which firms operate today is highly competitive and highly fluctuating, quite similar to that of a military conflict. After the appropriate theoretical conditions were set, the above models were applied in cases of operation of modern firms. More specifically, Richardson’s arms race model was applied to secondary data from the mobile phone industry in Greece. The results of applying the model led to the conclusion that the theoretical models are almost identical with reality, which means that they can be applied to firms under the appropriate preconditions.