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Empirical Analysis of a Dynamic Duopoly Model of Competition

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  • Chintagunta, Pradeep K
  • Jain, Dipak C

Abstract

Empirically validating and testing the specification of game theoretic models has received limited attention in the marketing literature. The authors provide an econometric framework for estimating the parameters of response functions when the observed data in the market place are the Nash equilibrium outcomes of an underlying dynamic duopoly game specification. Specifically, the estimation procedure accounts for the joint endogeneity of market shares and marketing efforts of market rivals using a system of simultaneous equations that included the market response function and the Nash equilibrium conditions. A formal statistical test is used to detect model misspecification. The empirical analysis is carried out using data from four product markets: pharmaceutical, soft drink, beer, and detergent. Comparisons are provided with conventional estimation of the response function parameters in which the equilibrium conditions are ignored in the estimation. Managerial implications of the empirical results are discussed. Copyright 1995 by MIT Press.

Suggested Citation

  • Chintagunta, Pradeep K & Jain, Dipak C, 1995. "Empirical Analysis of a Dynamic Duopoly Model of Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 109-131, Spring.
    • Handle: RePEc:bla:jemstr:v:4:y:1995:i:1:p:109-31
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    Cited by:

    1. James, Waters, 2015. "Do vegetarian marketing campaigns promote a vegan diet?," MPRA Paper 66737, University Library of Munich, Germany.
    2. A. Prasad & S. P. Sethi, 2004. "Competitive Advertising Under Uncertainty: A Stochastic Differential Game Approach," Journal of Optimization Theory and Applications, Springer, vol. 123(1), pages 163-185, October.
    3. Guidolin, Mariangela & Guseo, Renato, 2015. "Technological change in the U.S. music industry: Within-product, cross-product and churn effects between competing blockbusters," Technological Forecasting and Social Change, Elsevier, vol. 99(C), pages 35-46.
    4. Krishnamoorthy, Anand & Prasad, Ashutosh & Sethi, Suresh P., 2010. "Optimal pricing and advertising in a durable-good duopoly," European Journal of Operational Research, Elsevier, vol. 200(2), pages 486-497, January.
    5. J. Miguel Villas-Boas & Russell S. Winer, 1999. "Endogeneity in Brand Choice Models," Management Science, INFORMS, vol. 45(10), pages 1324-1338, October.
    6. Richards, Timothy J., 2004. "Price and Product-Line Rivalry Among Supermarket Retailers," Working Papers 28535, Arizona State University, Morrison School of Agribusiness and Resource Management.
    7. Erickson, Gary M., 2009. "An oligopoly model of dynamic advertising competition," European Journal of Operational Research, Elsevier, vol. 197(1), pages 374-388, August.
    8. Prasad A. Naik & Ashutosh Prasad & Suresh P. Sethi, 2008. "Building Brand Awareness in Dynamic Oligopoly Markets," Management Science, INFORMS, vol. 54(1), pages 129-138, January.
    9. Sylvie Tchumtchoua & Ronald W. Cotterill, 2010. "Optimal Brand and Generic Advertising Policies in a Dynamic Differentiated Product Oligopoly," Food Marketing Policy Center Research Reports 126, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    10. Frank M. Bass & Anand Krishnamoorthy & Ashutosh Prasad & Suresh P. Sethi, 2005. "Generic and Brand Advertising Strategies in a Dynamic Duopoly," Marketing Science, INFORMS, vol. 24(4), pages 556-568, February.
    11. Nolan Miller & Amit Pazgal, 2007. "Advertising budgets in competitive environments," Quantitative Marketing and Economics (QME), Springer, vol. 5(2), pages 131-161, June.
    12. Richards, Timothy J. & Patterson, Paul M., 2002. "Strategic Interaction With Multiple Tools: A New Empirical Model," Working Papers 28545, Arizona State University, Morrison School of Agribusiness and Resource Management.
    13. Yanwu Yang & Baozhu Feng & Joni Salminen & Bernard J. Jansen, 2022. "Optimal advertising for a generalized Vidale–Wolfe response model," Electronic Commerce Research, Springer, vol. 22(4), pages 1275-1305, December.
    14. Anshuman Chutani & Suresh Sethi, 2012. "Cooperative Advertising in a Dynamic Retail Market Oligopoly," Dynamic Games and Applications, Springer, vol. 2(4), pages 347-375, December.
    15. Ladislava Grochová, 2011. "Advertising as a possible determinant of private consumption," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 59(4), pages 97-104.
    16. Richards, Timothy J., 2002. "Dynamic Strategic Interaction: A Synthesis Of Modeling Methods," Western Economics Forum, Western Agricultural Economics Association, vol. 1(01), pages 1-5.
    17. Gary M. Erickson, 2009. "Advertising Competition in a Dynamic Oligopoly with Multiple Brands," Operations Research, INFORMS, vol. 57(5), pages 1106-1113, October.

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