TEXStrict Nash equilibria in a duopolistic market share model

Jane M. Binner, F. Ciardiello, L. R. Fletcher, Vassili N. Kolokoltsov

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Abstract

This paper develops a duopolistic discounted marketing model with linear advertising costs and advertised prices for mature markets still in expansion. Generic and predatory advertising eects are combined together in the model. We characterise a class of advertising models with some eciency for production costs. For such a class of models, advertising investments have a no-free-riding strict Nash equilibrium in pure strategies if discount rates are small. We discuss the entity of this eciency at varying of parameters of our advertising model. We provide a computational framework in which market shares can be computed at equilibrium, too. We analyse market share dynamics for an asymmetrical numerical scenario where one of the two rms is more eective in generic and
predatory advertising. Several numerical insights on market share dynamics are obtained. Our computational framework allows for dierent scenarios in practical applications and it is developed using the Mathematica software. We provide rational insights on how competing rms might ultimately reduce the quality
of manufactured goods when they publish the prices at the beginning of marketing campaigns.
Original languageEnglish
Article number1940007
Number of pages20
JournalInternational Game Theory Review
Volume21
Issue number2
DOIs
Publication statusPublished - 20 May 2019

Keywords

  • Advertising models
  • Nash equilibrium
  • Generic advertising
  • Brand advertising
  • Computational equilibria
  • Market shares
  • Sticky prices
  • Supply chains

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