Article ID: | iaor20001615 |
Country: | United States |
Volume: | 102 |
Issue: | 1 |
Start Page Number: | 111 |
End Page Number: | 125 |
Publication Date: | Jul 1999 |
Journal: | Journal of Optimization Theory and Applications |
Authors: | Jrgensen Steffen, Zaccour Georges |
Keywords: | gaming |
This paper is concerned with conflict and coordination in a two-member channel of distribution. We propose a differential game model that includes carryover effects of advertising, expressed by a retailer-specific stock of advertising goodwill. Pricing and advertising strategies for both firms are identified under channel conflict as well as coordination. Dynamic advertising policies are designed as stationary Markov perfect strategies. In a symmetric case, these strategies can be determined in closed form, taking into consideration explicitly nonnegativity constraints on advertising rates. We establish a global result for the relationship between the advertising strategies of the two firms under conflict and coordination.