Advertising Competition with Market Expansion for Finite Horizon Firms
2005
Firms that want to increase the sales of
their brands through advertising have the choice of capturing
market share from their competitors through brand advertising, or
increasing primary demand for the category through generic
advertising. In this paper, differential game theory is used to
analyze the effects of the two types of advertising decisions made
by firms offering a product in a dynamic duopoly. Each firm's
sales depend not only on its own and its competitor's brand
advertising strategies, but also on the generic advertising
expenditures of the two firms. Closed-loop Nash equilibrium
solutions are obtained for symmetric and asymmetric competitors in
a finite-horizon setting. The analysis for the symmetric case
results in explicit solutions, and numerical techniques are
employed to solve the problem for asymmetric firms.
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