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Spatial Advertisement Competition: Based on Game Theory

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  • Zheng-xun Tan

Abstract

Since advertisement is an important strategy of firms to improve market share, this paper highlights duopoly advertisement under the Hotelling model. A model of advertisement under spatial duopoly is established, and corresponding effects of brand values and transportation costs are all captured. This study presents the proportion of sales revenue spending on advertisement. The condition for free‐rider in advertisement investment is discussed. Under firms with the identical brand values, if firms′ advertisement points to corresponding consumers, price and advertisement investment are all reduced. Therefore, advertisement is discussed under spatial competition in this work.

Suggested Citation

  • Zheng-xun Tan, 2014. "Spatial Advertisement Competition: Based on Game Theory," Journal of Applied Mathematics, John Wiley & Sons, vol. 2014(1).
    • Handle: RePEc:wly:jnljam:v:2014:y:2014:i:1:n:216193
    DOI: 10.1155/2014/216193
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    References listed on IDEAS

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    1. Greenhut, M L & Ohta, H, 1972. "Monopoly Output Under Alternative Spatial Pricing Techniques," American Economic Review, American Economic Association, vol. 62(4), pages 705-713, September.
    2. Bagwell Kyle & Lee Gea M, 2010. "Advertising Competition in Retail Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-38, August.
    3. Pu-yan Nie, 2011. "Spatial maintenance goods under monopoly," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 24(4), pages 16-26, January.
    4. Oksana Loginova & X. Henry Wang, 2009. "Customization: Ideal Varieties, Product Uniqueness and Price Competition," Economics Bulletin, AccessEcon, vol. 29(4), pages 2573-2581.
    5. Larralde, Hernn & Stehl, Juliette & Jensen, Pablo, 2009. "Analytical solution of a multi-dimensional Hotelling model with quadratic transportation costs," Regional Science and Urban Economics, Elsevier, vol. 39(3), pages 343-349, May.
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    Cited by:

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