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The Structure of Equilibria in Market Share Attraction Models

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  • George E. Monahan

    (Department of Business Administration, 350 Commerce Building West, University of Illinois at Urbana-Champaign, 1206 South Sixth Street, Champaign, Illinois 61820)

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    Abstract

    A market share attraction model of competitive effort allocation by two firms is formulated as a constant sum, two-person game. The dependence of optimal competitive effort allocations on factors such as gross profit margins, relative effectiveness of effort, and attraction elasticity of effort is studied. Two versions of the model are developed. In the first version, effort budgets of both competitors are exogenously fixed. In the second, the competitors each choose both budget levels and allocations. In each version of the model, an important function of the parameters, called the competitive advantage ratio, indicates when it is optimal to either increase or decrease effort allocated in a market in response to changes in various measures of effectiveness. Implications of differences in the cost associated with each competitor's budget on equilibrium allocations are derived.

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    File URL: http://dx.doi.org/10.1287/mnsc.33.2.228
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 33 (1987)
    Issue (Month): 2 (February)
    Pages: 228-243

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    Handle: RePEc:inm:ormnsc:v:33:y:1987:i:2:p:228-243

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    Related research

    Keywords: market share attraction game; Nash equilibrium; sensitivity analysis;

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    Cited by:
    1. Mesak, Hani I., 1999. "On the generalizability of advertising pulsation monopoly results to an oligopoly," European Journal of Operational Research, Elsevier, vol. 117(3), pages 429-449, September.
    2. Wolfgang Eggert & Martin Kolmar, 2004. "Contests with Size Effects," CESifo Working Paper Series 1346, CESifo Group Munich.
    3. John Duffy & Alexander Matros, 2013. "Stochastic Asymmetric Blotto Games: Theory and Experimental Evidence," Working Papers 509, University of Pittsburgh, Department of Economics, revised Nov 2013.
    4. Alex Robson, 2005. "Multi-Item Contests," ANU Working Papers in Economics and Econometrics 2005-446, Australian National University, College of Business and Economics, School of Economics.

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