Advertising in a Differential Game of Spatial Competition.

Lambertini, Luca ; Bertuzzi, Giorgia (2001) Advertising in a Differential Game of Spatial Competition. Bologna: Dipartimento di Scienze economiche DSE, p. 20. DOI 10.6092/unibo/amsacta/4901. In: Quaderni - Working Paper DSE (400). ISSN 2282-6483.
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Abstract

We investigate a dynamic duopoly game with horizontal product differentiation, to show that the standard approach to spatial competition fails to produce a pure strategy equilibrium in prices when treated in a differential game framework. This holds independently of the shape of the transportation cost function. Then, we introduce an endogenous costs associated with the choice of location and characterize the open-loop and closed-loop equilibria of the model, showing that in the closed-loop case firms invest more in product differentiation and less in advertising, than they do in the open-loop setting. This happens because the gains from product differentiation can be more easily internalised than those associated with advertising.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Lambertini, Luca
Bertuzzi, Giorgia
Keywords
horizontal differentiation, advertising, steady state, differential games.
Subjects
ISSN
2282-6483
DOI
Deposit date
17 Mar 2016 11:57
Last modified
17 Mar 2016 11:57
URI

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