The impact of advertising in a duopoly model
We investigate the impact of advertising in a simple static differentiated duopoly model. First, we consider the Nash equilibrium of the situation in which the duopolistic firms compete simultaneously with two instruments, i.e. the prices and the advertising expenditures. Second, we examine the Nash equilibrium of the situa-tion in which the firms only compete in prices and do not advertise at all. Next, we compare the two different Nash equilibria in order to assess the impact of advertising. In particular, we characterize in terms of the model parameters the circumstances in which the profits, outputs and/or prices of each firm are greater (smaller) in the Nash equilibrium with advertising than in the Nash equilibrium without advertising. We show that the results depend on (a) the size of the (positive) effect of advertising of a firm on its own demand, (b) the size and nature (stimulating or adverse) of the cross-effect of the advertising of each firm on the demand of the other firm, and (c) the size of the autonomous demand of the firms.
|Date of creation:||1999|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +31 50 363 7185
Fax: +31 50 363 3720
Web page: http://som.eldoc.ub.rug.nl/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gasmi, F. & Vuong, Q.H., 1988. "An Econometric Analysis Of Some Duopolistic Games In Prices And Advertising," Papers m8903, Southern California - Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:dgr:rugsom:99b42. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joke Bulthuis)
If references are entirely missing, you can add them using this form.