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Strategic Interaction With Multiple Tools: A New Empirical Model

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Author Info
Richards, Timothy J.
Patterson, Paul M.
Abstract

The Lanchester model of strategic interaction typically considers only two-firm rivalry and one strategic tool. This paper presents an alternative that considers rivalry among several firms using multiple tools. Marketing decisions are dynamically optimal and use equations of motion for market share that are consistent with optimal consumer choice. Using a single-market case study that consists of five years of monthly data on ready to eat cereal sales, advertising, product development investments and new product introductions, we test our model against a similar Lanchester specification. Non-nested specification tests fail to reject the proposed model, but reject the Lanchester alternative.

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Paper provided by Arizona State University, Morrison School of Agribusiness and Resource Management in its series Working Papers with number 28545.

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Date of creation: 2002
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Handle: RePEc:ags:asumwp:28545

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Related research
Keywords: advertising; brands; cereal; dynamic; Lanchester; oligopoly; strategic interaction.; Marketing;

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  10. Pollak, Robert A & Wales, Terence J, 1980. "Comparison of the Quadratic Expenditure System and Translog Demand Systems with Alternative Specifications of Demographic Effects," Econometrica, Econometric Society, vol. 48(3), pages 595-612, April. [Downloadable!] (restricted)
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  13. Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer. [Downloadable!] (restricted)
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  15. Aviv Nevo, 1998. "Measuring Market Power in the Ready-to-Eat Cereal Industry," NBER Working Papers 6387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Moschini, Giancarlo & Vissa, Anuradha, 1992. "A Linear Inverse Demand System," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(02), December. [Downloadable!]
  17. Roberts, M.J. & Samuelson, L., 1988. "An Empirical Analysis Of Dynamic, Non-Price Competition In An Oligopolistic Industry," Papers 3-88-14, Pennsylvania State - Department of Economics.
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  18. Sorger, Gerhard, 1989. "Competitive dynamic advertising : A modification of the Case game," Journal of Economic Dynamics and Control, Elsevier, vol. 13(1), pages 55-80, January. [Downloadable!] (restricted)
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