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A Dynamic Advertising Game with Market Growth

In: Dynamic Perspectives on Managerial Decision Making

Author

Listed:
  • Steffen Jørgensen

    (University of Southern Denmark)

  • Simon Pierre Sigué

    (Athabasca University)

Abstract

The paper considers a market in which two firms compete on advertising over time. Each firm can use three types of advertising: offensive advertising which attempts to attract customers from the rival firm, defensive advertising which aims at protecting a firm’s customer base from the rival’s attacks, and generic advertising to make industry sales grow. We address questions like: How should a strategy for the simultaneous use of the three types of advertising be designed? How would the resulting time paths of sales look like? The paper studies a differential game played over an infinite time horizon and provides closed-form expressions for equilibrium advertising strategies and sales rate trajectories.

Suggested Citation

  • Steffen Jørgensen & Simon Pierre Sigué, 2016. "A Dynamic Advertising Game with Market Growth," Dynamic Modeling and Econometrics in Economics and Finance, in: Herbert Dawid & Karl F. Doerner & Gustav Feichtinger & Peter M. Kort & Andrea Seidl (ed.), Dynamic Perspectives on Managerial Decision Making, pages 77-91, Springer.
    • Handle: RePEc:spr:dymchp:978-3-319-39120-5_5
    DOI: 10.1007/978-3-319-39120-5_5
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