Advertising in a Differential Oligopoly Game.

Lambertini, Luca ; Cellini, Roberto (2001) Advertising in a Differential Oligopoly Game. Bologna: Dipartimento di Scienze economiche DSE, p. 23. DOI 10.6092/unibo/amsacta/4871. In: Quaderni - Working Paper DSE (427). ISSN 2282-6483.
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Abstract

We illustrate a differential oligopoly game where firms compete à la Cournot in homogeneous goods in the market phase, and invest in advertising activities aimed at increasing consumers’ reservation price. Such investments produce external effects, characterizing the advertising activity as a public good. We derive the open-loop and the closed-loop Nash equilibria, and show that the properties of the equilibria depend on the curvature of the market demand function. The comparative assessment of these equilibria shows that firms’ advertising efforts are larger in the open-loop than in the closed-loop equilibrium. We also show that a cartel involving all firms, setting both quantities and advertising efforts so as to maximize joint profits, may produce a steady state where social welfare is higher than the social welfare levels associated with both the non-cooperative settings.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Lambertini, Luca
Cellini, Roberto
Keywords
advertising, differential games, capital accumulation, open-loop equilibria, closed-loop equilibria.
Subjects
ISSN
2282-6483
DOI
Deposit date
17 Mar 2016 12:04
Last modified
17 Mar 2016 12:04
URI

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