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Competitive Targeted Marketing

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  • Hang-Hyun Jo
  • Jeoung-Yoo Kim
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    Abstract

    In this paper, we consider two firms diffusing incompatible technologies and their decision of consumer targeting. The technology adoption is made in two steps. First, once the firms sell their products to their respective targeted consumer, the technology is diffused successively by word-of-mouth communication from the initial consumer to other consumers linked along the network. Then, in the second step, each consumer imitates the technology distribution keeps evolving until it reaches the long-run steady state. We demonstrate that the early entrant chooses the minmax location when firms are myopic in the sense that they do not take the imitation possibility into account. If firms consider the possibility of imitation, the best target will tend towards a hub, although the minmax principle in general keeps valid in the sense that it should be the minmax location after considering imitation.

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    File URL: http://www.iser.osaka-u.ac.jp/library/dp/2012/DP0834.pdf
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    Bibliographic Info

    Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0834.

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    Date of creation: Mar 2012
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    Handle: RePEc:dpr:wpaper:0834

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    1. Jo, Hang-Hyun & Ki Baek, Seung & Moon, Hie-Tae, 2006. "Immunization dynamics on a two-layer network model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 361(2), pages 534-542.
    2. Katarzyna Sznajd-Weron, 2005. "Sznajd model and its applications," HSC Research Reports HSC/05/04, Hugo Steinhaus Center, Wroclaw University of Technology.
    3. Katarzyna Sznajd-Weron & Jozef Sznajd, 2000. "Opinion evolution in closed community," HSC Research Reports HSC/00/04, Hugo Steinhaus Center, Wroclaw University of Technology.
    4. F. Schweitzer & L. Behera, 2009. "Nonlinear voter models: the transition from invasion to coexistence," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 67(3), pages 301-318, February.
    5. Andrea Galeotti & Sanjeev Goyal, 2007. "A Theory of Strategic Diffusion," Economics Discussion Papers 635, University of Essex, Department of Economics.
    6. Jeong-Yoo Kim & Tackseung Jun, 2004. "A theory of consumer referral," Econometric Society 2004 Far Eastern Meetings 488, Econometric Society.
    7. HoƂyst, Janusz A. & Kacperski, Krzysztof & Schweitzer, Frank, 2000. "Phase transitions in social impact models of opinion formation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 285(1), pages 199-210.
    8. Kim, Beom Jun & Jun, Tackseung & Kim, Jeong-Yoo & Choi, M.Y., 2006. "Network marketing on a small-world network," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 360(2), pages 493-504.
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