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Advertising and Competition for Market Share Between a New Good Producer and a Remanufacturer

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  • Batabyal, Amitrajeet
  • Beladi, Hamid

Abstract

We study the strategic interaction between a new good producer and a remanufacturer who use advertising campaigns to compete for a dominant share of the market for a certain good. Each firm chooses one of three possible strategies for running its advertising campaign. The two rival firms care only about capturing a dominant share of the relevant market. Hence, if a firm expects to capture dominant market share with probability p ∈ [0,1] then its payoff in the game we study is also p. Our analysis leads to four results. First, we provide the normal form representation of the game between the new good producer and the remanufacturer. Second, we specify the game in matrix form. Third, we indicate what happens at each stage of the elimination of strictly dominated strategies. Finally, we show that the iterated elimination of strictly dominated strategies yields a clear and unique prediction about the outcome of the advertising game.

Suggested Citation

  • Batabyal, Amitrajeet & Beladi, Hamid, 2016. "Advertising and Competition for Market Share Between a New Good Producer and a Remanufacturer," MPRA Paper 74085, University Library of Munich, Germany, revised 20 Jun 2016.
    • Handle: RePEc:pra:mprapa:74085
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    References listed on IDEAS

    as
    1. Amitrajeet A. Batabyal & Hamid Beladi, 2017. "A game model of competition between a new good producer and a remanufacturer using negative advertising," Asia-Pacific Journal of Regional Science, Springer, vol. 1(2), pages 329-336, October.
    2. Geraldo Ferrer & Jayashankar M. Swaminathan, 2006. "Managing New and Remanufactured Products," Management Science, INFORMS, vol. 52(1), pages 15-26, January.
    3. Hong, Xianpei & Xu, Lei & Du, Peng & Wang, Wenjuan, 2015. "Joint advertising, pricing and collection decisions in a closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 167(C), pages 12-22.
    4. Amitrajeet A. Batabyal & Hamid Beladi, 2016. "A game model of competition for market share between a new good producer and a remanufacturer," Economics Bulletin, AccessEcon, vol. 36(2), pages 963-969.
    5. Shi, Lian & Sheng, Zhaohan & Xu, Feng, 2015. "The dynamics of competition in remanufacturing: A stability analysis," Economic Modelling, Elsevier, vol. 50(C), pages 245-253.
    6. Giutini, Ron & Gaudette, Kevin, 2003. "Remanufacturing: The next great opportunity for boosting US productivity," Business Horizons, Elsevier, vol. 46(6), pages 41-48.
    7. Lebreton, Baptiste & Tuma, Axel, 2006. "A quantitative approach to assessing the profitability of car and truck tire remanufacturing," International Journal of Production Economics, Elsevier, vol. 104(2), pages 639-652, December.
    8. Aydin, R. & Kwong, C.K. & Ji, P., 2015. "A novel methodology for simultaneous consideration of remanufactured and new products in product line design," International Journal of Production Economics, Elsevier, vol. 169(C), pages 127-140.
    9. Mitra, Supriya & Webster, Scott, 2008. "Competition in remanufacturing and the effects of government subsidies," International Journal of Production Economics, Elsevier, vol. 111(2), pages 287-298, February.
    10. Amitrajeet A. Batabyal & Hamid Beladi, 2016. "A Game Model of New and Remanufactured Goods, Brown and Green Consumers, and Market Share Dominance," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 14(2), pages 345-354, December.
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    Cited by:

    1. Amitrajeet A. Batabyal & Hamid Beladi, 2018. "How transport costs affect the decision to purchase a new or a remanufactured good," Asia-Pacific Journal of Regional Science, Springer, vol. 2(2), pages 529-542, August.

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    More about this item

    Keywords

    Advertising; Duopoly; New Good Producer; Remanufacturer; Dominated Strategy;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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