Advertising and endogenous exit in a differentiated duopoly

Mantovani, Andrea ; Mion, Giordano (2002) Advertising and endogenous exit in a differentiated duopoly. DOI 10.6092/unibo/amsacta/637.
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Abstract

In this paper we consider a duopoly two-stage duopoly where firms first decide whether to invest in advertising and then compete in prices. Advertising has two effects: a market enlargement for both firms and a predatory gain for the investing firm only. Both symmetric and asymmetric equilibria may arise. The two most interesting cases are a coor-dination game where both firms investing and non-investing are equilibria, and a chicken game where only one firm invests while the other is possibly driven (endogenously) out of the market. Our results suggest that product differentiation has an ambiguous impact on investment in advertising and that strong product substitutability may induce a coordination problem.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Mantovani, Andrea
Mion, Giordano
Keywords
Advertising product differentiation endogenous exit asymmetric equilibria coordination games
Subjects
DOI
Deposit date
17 Jun 2004
Last modified
17 Feb 2016 13:59
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