Dynamic Advertising under Vertical Product Differentiation

Colombo, Luca ; Lambertini, Luca (2002) Dynamic Advertising under Vertical Product Differentiation. DOI 10.6092/unibo/amsacta/636.

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Abstract

We investigate a dynamic advertising model where product quality is en-dogenous. In the differential game between single-product firms, there exists a parameter range where the low-quality firm uses a more efficient advertising technology and earns higher profits than the rival. Moreover, we show that equilibrium qualities are the same under duopoly, multiproduct monopoly and social planning, the only distortion being concerned with output levels.

Abstract

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Monografia (Working paper)

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