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Optimal Brand and Generic Advertising Policies in a Dynamic Differentiated Product Oligopoly

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Author Info

  • Sylvie Tchumtchoua

    ()
    (University of Connecticut)

  • Ronald W. Cotterill

    ()
    (University of Connecticut)

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    Abstract

    In some product categories, generic advertising is used to increase market demand of the category and at the same time brand advertising is used to entice consumers to choose the advertised brand over competing brands. This paper empirically investigates the optimal levels of brand and generic advertising in a dynamic differentiated product oligopoly. A nested logit demand system incorporating brand and generic advertising goodwill stocks is specified and estimated without imposing any supply-side restrictions. Demand side parameters are then used to calibrate a dynamic game of brand and generic advertising that takes into account the vertical relationship between manufacturers and retailers. Estimates from the fluid milk product category indicate that brand advertising is effective for increasing brand level demand and generic advertising has a differential effect on individual brands. On the supply side, we found that it is not optimal for brand manufacturers to advertise in the presence of generic advertising.

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    File URL: http://fmpc.uconn.edu/publications/rr/rr126.pdf
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    Bibliographic Info

    Paper provided by University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy in its series Food Marketing Policy Center Research Reports with number 126.

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    Length: 41 pages
    Date of creation: Mar 2010
    Date of revision:
    Handle: RePEc:zwi:fpcrep:126

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    Related research

    Keywords: brand advertising; generic advertising; dynamic oligopoly; Markov perfect equilibrium; Bayesian analysis;

    References

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    1. Philip R. Vande Kamp & Harry M. Kaiser, 2000. "Optimal Temporal Policies in Fluid Milk Advertising," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 274-286.
    2. Philip R. Vande Kamp & Harry M. Kaiser, 1999. "Irreversibility in Advertising-Demand Response Functions: An Application to Milk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(2), pages 385-396.
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    Cited by:
    1. Li, Xun & Lopez, Rigoberto A., 2012. "Spillover Effects of TV Advertising: The Case of Carbonated Soft Drinks," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124724, Agricultural and Applied Economics Association.

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