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Optimal advertising model in a dynamic marketing with competing brands

Author

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  • Ming Yang Zhou
  • Jie Lin

Abstract

We consider a marketing channel consisting of one retailer and two independent and competing manufacturers. One distinctive feature of this paper is that each brand's goodwill evolves according to a modified Nerlove-Arrow dynamics, in such a way that the advertising effort of one brand hurts the competitor's goodwill stock. We obtain the feedback advertising equilibrium policies for the retailer and manufacturers in explicit form for a linear demand formulation and assess the impact of the margin profit and intensity of brand competition on these strategies in different settings. Then the results between the Stackelberg model and cooperative model are compared. Numerical examples show the paths for the evolution of the demand function and for the profits of channel members through the computation of the goodwill state variable trajectory and reveal that the brand competition coefficient has different effects on strategies.

Suggested Citation

  • Ming Yang Zhou & Jie Lin, 2015. "Optimal advertising model in a dynamic marketing with competing brands," International Journal of Manufacturing Technology and Management, Inderscience Enterprises Ltd, vol. 29(1/2), pages 116-137.
    • Handle: RePEc:ids:ijmtma:v:29:y:2015:i:1/2:p:116-137
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