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Advertising and Competition for Market Share between a New Good Producer and a Remanufacturer

Author

Listed:
  • Batabyal Amitrajeet A.

    (Rochester Institute of Technology, Rochester,New York, United States of America)

  • Beladi Hamid

    (University of Texas at San Antonio, San Antonio,Texas, United States of America)

Abstract

We study the strategic interaction between a new good producer and a remanufacturer who use advertising campaigns to compete for a dominant share of the market for a certain good. Each firm chooses one of three possible strategies for running its advertising campaign. The two rival firms care only about capturing a dominant share of the relevant market. Hence, if a firm expects to capture dominant market share with probability p є [0, 1], then its payoff in the game we study is also p. Our analysis leads to four results. First, we provide the normal form representation of the game between the new good producer and the remanufacturer. Second, we specify the game in matrix form. Third, we indicate what happens at each stage of the elimination of strictly dominated strategies. Finally, we show that the iterated elimination of strictly dominated strategies yields a clear and unique prediction about the outcome of the advertising game.

Suggested Citation

  • Batabyal Amitrajeet A. & Beladi Hamid, 2018. "Advertising and Competition for Market Share between a New Good Producer and a Remanufacturer," German Economic Review, De Gruyter, vol. 19(1), pages 113-118, February.
    • Handle: RePEc:bpj:germec:v:19:y:2018:i:1:p:113-118
    DOI: 10.1111/geer.12121
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    Cited by:

    1. Amitrajeet A. Batabyal & Hamid Beladi, 2018. "How transport costs affect the decision to purchase a new or a remanufactured good," Asia-Pacific Journal of Regional Science, Springer, vol. 2(2), pages 529-542, August.

    More about this item

    Keywords

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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