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A Stackelberg viral marketing design for two competing players

Author

Listed:
  • Olivier Lindamulage de Silva

    (CRAN - Centre de Recherche en Automatique de Nancy - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Vineeth Varma

    (CRAN - Centre de Recherche en Automatique de Nancy - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Ming Cao

    (University of Groningen [Groningen])

  • Irinel-Constantin Morarescu

    (CRAN - Centre de Recherche en Automatique de Nancy - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Samson Lasaulce

    (CRAN - Centre de Recherche en Automatique de Nancy - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

Abstract

Stackelberg duopoly model in which two firms compete to maximize their market share is considered. The firms offer a service/product to customers that are spread over several geographical regions (e.g., countries, provinces, or states). Each region has its own characteristics (spreading and recovery rates) of each service propagation. We consider that the spreading rate can be controlled by each firm and is subject to some investment that the firm does in each region. One of the main objectives of this work is to characterize the advertising budget allocation strategy for each firm across regions to maximize its market share when competing. To achieve this goal we propose a Stackelberg game model that is relatively simple while capturing the main effects of the competition for market share. By characterizing the strong/weak Stackelberg equilibria of the game, we provide the associated budget allocation strategy. In this setting, it is established under which conditions the solution of the game is the so-called "winner takes all". Numerical results expand upon our theoretical findings and we provide the equilibrium characterization for an example.

Suggested Citation

  • Olivier Lindamulage de Silva & Vineeth Varma & Ming Cao & Irinel-Constantin Morarescu & Samson Lasaulce, 2023. "A Stackelberg viral marketing design for two competing players," Post-Print hal-04150375, HAL.
    • Handle: RePEc:hal:journl:hal-04150375
    DOI: 10.1109/LCSYS.2023.3291421
    Note: View the original document on HAL open archive server: https://hal.science/hal-04150375
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    References listed on IDEAS

    as
    1. R. Srinivasan, 2021. "Winner-Takes-All Dynamics," Management for Professionals, in: Platform Business Models, chapter 0, pages 199-215, Springer.
    2. Basu, Kaushik & Singh, Nirvikar, 1990. "Entry-Deterrence in Stackelberg Perfect Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 61-71, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Winner takes all; viral marketing; resource allocation; Stackelberg solution;
    All these keywords.

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