Lambertini, Luca ;
Cellini, Roberto
(2002)
Advertising with Spillover Effects in a Differential Oligopoly Game With Differentiated Goods.
Bologna:
Dipartimento di Scienze economiche DSE,
p. 19.
DOI
10.6092/unibo/amsacta/4868.
In: Quaderni - Working Paper DSE
(430).
ISSN 2282-6483.
Full text available as:
Abstract
We consider a differentiated oligopoly where firms compete a la Cournot in the market phase, and each firms may invest in advertising activity, to enlarge its market size. Each firm`s advertising effort has positive external effects on the market size of all rivals. We derive the open-loop (and the coincident closed-loop) Nash equilibrium, and the optimal behavior of a cartel involving all firms setting both quantities and advertising efforts so as to maximize joint profits. The comparative assessment of these equilibria shows that a cartel may produce a steady ste where social welfare is higher than the social welfare level associated wit the non-cooperative setting. This is due to the positive externalities from advertising activity.
Abstract
We consider a differentiated oligopoly where firms compete a la Cournot in the market phase, and each firms may invest in advertising activity, to enlarge its market size. Each firm`s advertising effort has positive external effects on the market size of all rivals. We derive the open-loop (and the coincident closed-loop) Nash equilibrium, and the optimal behavior of a cartel involving all firms setting both quantities and advertising efforts so as to maximize joint profits. The comparative assessment of these equilibria shows that a cartel may produce a steady ste where social welfare is higher than the social welfare level associated wit the non-cooperative setting. This is due to the positive externalities from advertising activity.
Document type
Monograph
(Working Paper)
Creators
Keywords
advertising, differential games, capital accumulation, closed loop equilibria,externalities.
Subjects
ISSN
2282-6483
DOI
Deposit date
17 Mar 2016 12:54
Last modified
17 Mar 2016 12:54
URI
Other metadata
Document type
Monograph
(Working Paper)
Creators
Keywords
advertising, differential games, capital accumulation, closed loop equilibria,externalities.
Subjects
ISSN
2282-6483
DOI
Deposit date
17 Mar 2016 12:54
Last modified
17 Mar 2016 12:54
URI
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