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The Structure of Equilibria in Market Share Attraction Models

Author

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  • George E. Monahan

    (Department of Business Administration, 350 Commerce Building West, University of Illinois at Urbana-Champaign, 1206 South Sixth Street, Champaign, Illinois 61820)

Abstract

A market share attraction model of competitive effort allocation by two firms is formulated as a constant sum, two-person game. The dependence of optimal competitive effort allocations on factors such as gross profit margins, relative effectiveness of effort, and attraction elasticity of effort is studied. Two versions of the model are developed. In the first version, effort budgets of both competitors are exogenously fixed. In the second, the competitors each choose both budget levels and allocations. In each version of the model, an important function of the parameters, called the competitive advantage ratio, indicates when it is optimal to either increase or decrease effort allocated in a market in response to changes in various measures of effectiveness. Implications of differences in the cost associated with each competitor's budget on equilibrium allocations are derived.

Suggested Citation

  • George E. Monahan, 1987. "The Structure of Equilibria in Market Share Attraction Models," Management Science, INFORMS, vol. 33(2), pages 228-243, February.
  • Handle: RePEc:inm:ormnsc:v:33:y:1987:i:2:p:228-243
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    File URL: http://dx.doi.org/10.1287/mnsc.33.2.228
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    Citations

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    Cited by:

    1. Eggert, Wolfgang & Kolmar, Martin, 2006. "Contests with size effects," European Journal of Political Economy, Elsevier, vol. 22(4), pages 989-1008, December.
    2. repec:pit:wpaper:509 is not listed on IDEAS
    3. repec:eee:jeborg:v:139:y:2017:i:c:p:88-105 is not listed on IDEAS
    4. Sanjiv Erat & Stylianos Kavadias, 2006. "Introduction of New Technologies to Competing Industrial Customers," Management Science, INFORMS, vol. 52(11), pages 1675-1688, November.
    5. Mesak, Hani I. & Calloway, James A., 1995. "A pulsing model of advertising competition: A game theoretic approach, part B -- Empirical application and findings," European Journal of Operational Research, Elsevier, vol. 86(3), pages 422-433, November.
    6. Mesak, Hani I. & Bari, Abdullahel & Luehlfing, Michael S. & Han, Fei, 2015. "On modeling the advertising-operations interface under asymmetric competition," European Journal of Operational Research, Elsevier, vol. 240(1), pages 278-291.
    7. Gérard P. Cachon & A. Gürhan Kök, 2007. "Category Management and Coordination in Retail Assortment Planning in the Presence of Basket Shopping Consumers," Management Science, INFORMS, vol. 53(6), pages 934-951, June.
    8. Alex Robson, 2005. "Multi-Item Contests," ANU Working Papers in Economics and Econometrics 2005-446, Australian National University, College of Business and Economics, School of Economics.
    9. Gérard P. Cachon & Christian Terwiesch & Yi Xu, 2008. "On the Effects of Consumer Search and Firm Entry in a Multiproduct Competitive Market," Marketing Science, INFORMS, vol. 27(3), pages 461-473, 05-06.
    10. Mesak, Hani I., 1999. "On the generalizability of advertising pulsation monopoly results to an oligopoly," European Journal of Operational Research, Elsevier, vol. 117(3), pages 429-449, September.
    11. Saif Benjaafar & Ehsan Elahi & Karen L. Donohue, 2007. "Outsourcing via Service Competition," Management Science, INFORMS, vol. 53(2), pages 241-259, February.
    12. Suman Basuroy & Dung Nguyen, 1998. "Multinomial Logit Market Share Models: Equilibrium Characteristics and Strategic Implications," Management Science, INFORMS, vol. 44(10), pages 1396-1408, October.
    13. Bazhanov, Andrei & Levin, Yuri & Nediak, Mikhail, 2015. "Quantity Competition in the Presence of Strategic Consumers," MPRA Paper 62075, University Library of Munich, Germany.

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