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On Pure-Strategy Nash Equilibria in a Duopolistic Market Share Model

Author

Listed:
  • J. M. Binner

    (Birmingham Business School, University of Birmingham, Edgbaston Park Rd, Birmingham B15 2TY, UK)

  • F. Ciardiello

    (Management School, University of Sheffield, Conduit Rd, Sheffield B15 2TY, UK)

  • L. R. Fletcher

    (School of Computing and Mathematical Sciences, Liverpool John Moores University, Byrom St, Liverpool L3 3AF, UK)

  • V. N. Kolokoltsov

    (Department of Statistics, University of Warwick Coventry CV4 7AL, UK5Faculty Applied Mathematics and Control Processes, St. Petersburg State University (Russia), FRC CSC Russian Academy of Science, Russia)

Abstract

This paper develops a duopolistic discounted marketing model with linear advertising costs and advertised prices for mature markets still in expansion. Generic and predatory advertising effects are combined together in the model. We characterize a class of advertising models with some lowered production costs. For such a class of models, advertising investments have a no-free-riding strict Nash equilibrium in pure strategies if discount rates are small. We discuss the entity of this efficiency at varying of parameters of our advertising model. We provide a computational framework in which market shares can be computed at equilibrium, too. We analyze market share dynamics for an asymmetrical numerical scenario where one of the two firms is more effective in generic and predatory advertising. Several numerical insights on market share dynamics are obtained. Our computational framework allows for different scenarios in practical applications and it is developed, thanks to Mathematica software.

Suggested Citation

  • J. M. Binner & F. Ciardiello & L. R. Fletcher & V. N. Kolokoltsov, 2019. "On Pure-Strategy Nash Equilibria in a Duopolistic Market Share Model," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 21(02), pages 1-20, June.
    • Handle: RePEc:wsi:igtrxx:v:21:y:2019:i:02:n:s0219198919400073
    DOI: 10.1142/S0219198919400073
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